This is not a correlated market. The dollar is Up+ and Crude is Up+ which is not normal and the 30 year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher 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 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 is trading Mixed with half the exchanges Higher and the other half Lower. Currently Europe is trading Mixed as well.

Possible Challenges To Traders Today

CPI is out at 8:30 AM EST. This is Major. Core CPI is out at 8:30 AM EST. This is Major.
Crude Oil Inventories is out at 10:30 AM EST. This is Major.
FOMC Member Brainard Speaks at 1 PM EST. This is Major
30-y Bond Auction starts at 1 PM EST. This is Major.
Beige Book is out at 2 PM EST. This is Major.
Federal Budget Balance is out at 2 PM EST. This is Major.
FOMC Member Clarida Speaks at 3 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 liken to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZN made it's move at around 10 AM EST. The ZN hit a High at around that time and the S&P moved Higher. If you look at the charts below ZN gave a signal at around 10 AM EST and the S&P moved Higher at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a High at around 10 AM EST and the S&P was moving Higher 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 Shorting opportunity on the 10 year note, as a trader you could have netted about 10 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar '21. The S&P contract is now March '21. 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

Bias

Yesterday we gave the markets an Upside bias as both the USD and Gold were trading Lower Tuesday morning and that usually signifies an Upside day. The markets didn't disappoint as the Dow gained 60 points and the other indices gained ground as well. Today we aren't dealing with a correlated market and our bias is Neutral.

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

Commentary

Well it appears as though Vice President Pence won't invoke the 25th Amendment relieving President Trump of his duties and power as the POTUS. I didn't really think he would do it either he may appear as a traitor to the Trump loyal. As such it seems that the new and latest Articles of Impeachment will be voted on and acted upon in Congress. It may pass the House of Representatives with flying colors but it would still have to go thru the Senate and they won't reconvene until January 19th one day before Biden is inaugurated as President. Marketwise it seems as though the markets have accepted the fact that we had a government upheaval last week and the effects of that is wearing off as the markets gained ground yesterday. Will that continue today? Only time will tell...

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.