This is not a correlated market. The USD is Up and Crude is Up which is not 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 Higher which is 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 goes Up the other goes Down. All of Asia traded Mixed. All of Europe is trading Mixed as well.

Possible challenges to traders

FOMC Member Barr Speaks at 9:05 AM EST. Major.
Final Manufacturing PMI is out at 9:45 AM EST. Major.
ISM Manufacturing PMI is out at 10 AM EST. Major.
ISM Manufacturing Prices is out at 10 AM EST. Major.
Jolts Job Openings is out at 10 AM EST. Major.
Construction Spending m/m is out at 10 AM EST. Major.
Economic Optimism - tentative. Major.
Total Vehicle Sales - All Day by brand. 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 9 AM EST with no real news pending. The Dow charged Higher at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT dived Lower at around 9 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

ZT -Sep 26 - 8/31/26

Dow - Sep 2026- 8/31/26

Bias

Yesterday we gave the markets a Mixed or Neutral bias but the markets veered to the Downside. All indices traded Lower yesterday. Today we aren't dealing with a correlated market, and our bias is Neutral or Mixed. Today our bias is to the Downside.

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

Commentary

As mentioned earlier it appears that we may be heading for the scenario of one day up, next day not. Hormuz is closed with no scheduled talks. Now the US has traded missiles with Iran and the markets paid the price for that. Will today be different? Only time will tell. Want to learn Market Correlation and determine market direction hours before the Opening Bell?

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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