House passes budget

USD: Jun '25 is Down at 99.205.  

Energies: Jul '25 Crude is Up at 61.29.

Financials: The Jun '25 30 Year T-Bond is Higher by 9 ticks and trading at 111.15.

Indices: The Jun '25 S&P 500 emini ES contract is 14 ticks Lower and trading at 5853.25.

Gold: The Jun'25 Gold contract is trading Up at 3331.40.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is 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 Lower and Crude is trading Higher which is correlated. Gold is trading Higher which is correlated with the US dollar trading Down.  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. All of Asia traded Lower.  Europe is trading Lower as well.

Possible challenges to traders

• FOMC Member Musalem Speaks at 9:35 AM EST.  This is Major.
• FOMC Member Schmid Speaks at 9:35 AM EST.    This is Major.
• New Home Sales is out at 10 AM EST.  This is Major.
• Existing Home Sales is out at 10 AM EST.  This is Major.
• FOMC Member Cook Speaks at 12 noon EST.  This is Major.
• OMC Financial Stability Report - tentative.  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 7:30 AM EST with no news pending.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:30 AM EST and the ZT climbed 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 

ZT -Jun 2025 - 5/22/25

Dow - Jun 2025- 5/22/25

Bias

Yesterday we gave the markets an Upside bias as Crude and Gold were both trading Lower Thursday morning, however the markets closed mainly Lower with the exception of the Nasdaq which traded 15 points Higher. Today we are dealing with a nearly correlated market, and our bias is to the Downside.

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

Commentary

Yesterday we thought the news that the House of Representatives passing a budget would elevate the markets, but the indices had other ideas.  The one point to realize is that this bill must now go to the Senate and they will have their ideas as to what they want in this bill.  Today we have more FOMC Members speaking so that could drive the markets in any direction.