US Dollar: Mar '22 USD is Up at 96.070.

Energies: Mar '22 Crude is Up at 86.12.

Financials: The Mar '22 30 Year bond is Down 2 ticks and trading at 155.06.

Indices: The Mar '22 S&P 500 emini ES contract is 212 ticks Higher and trading at 4402.00. 

Gold: The Feb'22 Gold contract is trading Down at 1845.90. Gold is 66 ticks Lower than its close.

Initial conclusion

This is not a correlated market. The dollar is Up, and Crude is Up which is not normal, but the 30-year Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is lower, 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. Currently Asia is trading mainly Higher with the exception of the Aussie and Nikkei exchanges which are Higher. Currently all of Europe is trading Higher.

Possible challenges to traders today

  • Goods Trade Balance is out at 8:30 AM EST. This is Major.

  • Prelim Wholesale Inventories is out at 8:30 AM EST. Major.

  • New Home Sales is out at 10 AM EST. This is Major.

  • Crude Oil Inventories is out at 10:30 AM EST. This is Major.

  • FOMC Statement is out at 2 PM EST. This is Major.

  • Federal Funds Rate is out at 2 PM EST. This is Major.

  • FOMC Press Conference starts at 2:30 PM EST. This is Major

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.  

We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, 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 ZN made its move at around 8:20 AM EST. The ZN hit a Low around that time and the S&P moved Lower. If you look at the charts below ZN gave a signal at around 8:20 AM EST and the S&P moved Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 8:20 AM EST and the S&P was moving Lower shortly thereafter. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 20 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar '22. The S&P contract is now Mar '22 as well. I've changed the format to Renko bars such that it may be more apparent and visible.  

Charts courtesy of MultiCharts built on an AMP platform

Chart

ZN - Mar 2022 - 01/25/22

S&P 500

S&P - Mar 2022 - 01/25/22

Bias

Yesterday we gave the markets a Neutral Bias as we saw no clear direction from a Market Correlation perspective. Half the instruments were Higher and the other half Lower. The Dow traded Lower by 67 points and the other indices traded Lower as well. Given that today is FOMC Day our bias is Neutral as is our custom on this day.

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

Commentary

Yesterday morning we saw no clear direction as half the instruments we use for Market Correlation purposes were pointed Higher and the other half Lower, hence the Neutral bias. Today the Federal Reserve meets to discuss interest rates. Do we think that the FOMC will raise? No, not at this juncture however come March that may well be a different scenario as The Fed has stated previous that come March they will. There are two days during any month that we will always maintain a Neutral or Mixed bias and that si Jobs Friday and FOMC Day. Why? Because the markets have never shown any sense of normalcy on those days and could in fact go anywhere.

Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.

There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.

In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.

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