FOMC Day

USD: Jun '25 is Up at 99.245.  

Energies: Jun '25 Crude is Up at 59.55.

Financials: The Jun '25 30 Year T-Bond is Higher by 4 ticks and trading at 114.28.

Indices: The Jun '25 S&P 500 emini ES contract is 140 ticks Higher and trading at 5660.75.

Gold: The Jun'25 Gold contract is trading Down at 3398.40.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not normal, and the 30 Year T-Bond is trading Higher.  The Financials should always correlate with the US dollar such that if the dollar is Higher, then the bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher which is not correlated. Gold is trading Lower which is correlated with the US dollar trading Up.  I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open. Asia traded Higher except the Sensex exchange.  All of Europe is trading Lower.

Possible challenges to traders

• Crude Oil inventories are out at 10:30 AM EST.  This is Major.
• Federal Funds Rate is out at 2 PM EST.  This is Major.
• FOMC Statement is out at 2 PM EST.  This is Major.
• FOMC Press Conference starts at 2:30 PM EST.  This is Major.
• Consumer Credit m/m is out at 3 PM EST.  This is Major.

Traders, please note that we've changed the Bond instrument from the 10 Year (ZN) to the 2 Year (ZT).  They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract.  The YM contract is the Dow Jones Industrial Average, and the purpose is to show reverse correlation between the two instruments.  Remember it's likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZT climbed Higher at around 7:40 AM EST with no eco news pending.  The Dow dropped Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:40 AM EST and the ZT moved Higher at around the same time.  These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better.  This represented a Long opportunity on the 2-year note, as a trader you could have netted a dozen plus ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Jun '25 and the Dow is Jun '25 as well.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

Dow -Jun 2025 - 5/06/25

ZT - Mar 2025- 5/06/25

Bias

Yesterday we gave the markets a Downside bias and the indices didn't disappoint. The Dow dropped 329 points, and the other indices lost ground as well.  Given that today is FOMC Day our bias is Neutral or Mixed.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

So yesterday the markets continued its downward trend.  All the indices lost ground but fortunately it wasn't dramatic or massive. Today we have the FOMC reporting at 2 PM EST and of course everyone will want to know if the Federal Reserve will lower. Personally, I don't think they will as they'll claim they need more data to decide.  I think it would be useful if they did lower rates, but time will tell in that regard.