FOMC day

Nick Mastrandrea Market Tea Leaves

USD: Sep '26 is Up at 99.935.

Energies: Oct '26 Crude is Down at 104.82.

Financials: The Dec '26 30 Year T-Bond is Lower by 4 ticks and trading at 106.15.

Indices: The Sep '26 S&P 500 emini ES contract is 52 ticks Higher and trading at 7669.00.

Gold: The Dec'26 Gold contract is trading Up at 4372.50.

Initial conclusion

This is not a correlated market. The USD is Up and Crude is Down which is normal, but the 30-Year T-Bond is trading Lower. 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 Lower and Crude is trading Lower which is not correlated. Gold is trading Higher which is not 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 goes Up the other goes Down. All of Asia traded Lower. All of Europe is trading Lower as well.

Possible Challenges to Traders

Core Retail Sales m/m is out at 8:30 AM EST. Major.
Retail Sales m/m is out at 8:30 AM EST. Major.
Import Prices m/m is out at 8:30 AM EST. Major.
Business Inventories m/m is out at 10 AM EST. Major.
NAHB Housing Market Index is out at 10 AM EST. Major.
Crude Oil Inventories is out at 10:30 AM EST. Major.
Federal Funds Rate is out at 2 PM EST. Major.
FOMC Economic Projections is out at 2 PM EST. Major.
FOMC Statement is out at 2 PM EST. Major.
FOMC Press Conference starts at 2:30 PM EST. Major.

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 dived Lower at around 8:30 AM EST with Retail Sales pending. The Dow rose at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT dived at around 8:30 AM EST and the Dow climbed Higher 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 Short opportunity on the 2-year note, as a trader you could have netted about a dozen plus ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT is now Sep '26. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

Bias

Yesterday we gave the markets a Downside bias and the markets didn't disappoint. The Dow shred 487 points, and the other indices lost ground as well. Today our bias is Neutral as it is FOMC Day and we always maintain a Neutral bias on that day. Why? Because the markets have never shown any sense of normalcy on FOMC Day.

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

Commentary

So the day has come and everyone wonders what the Fed will do. Raise or not? Personally I'm not certain what the Fed will do.

Author

Nick Mastrandrea

Market Tea Leaves

Nick Mastrandrea over 20 years experience in trading and formerly held a NASD Series 7. He currently holds a NJ Life, Health and Variable Authority. Nick is a published writer and his work has appeared in Futures Magazine, TraderPlanet and others.

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