It's the economy stupid

Nick Mastrandrea Market Tea Leaves

USD: Dec '26 is down at 101.285.

Energies: Dec '26 Crude is down at 95.26.

Financials: The Dec '26 30 Year T-Bond is Lower by 10 ticks and trading at 107.26.

Indices: The Dec '26 S&P 500 e-mini ES contract is 304 ticks Higher and trading at 7673.25.

Gold: The Dec'26 Gold contract is trading Up at 4051.40.

Initial conclusion

This is not a correlated market. The USD is down, and Crude is down, which is not normal, and 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 Up 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 goes up, the other goes down. Asia traded Mixed. Europe is trading Higher.

Possible challenges to traders

ADP Non-Farm Employment Change is out at 8:15 AM EST. Major.
Trade Balance is out at 8:30 AM EST. Major.
Final Services PMI is out at 9:45 AM EST. Major.
ISM Services PMI is out at 10 AM EST. Major.
Crude Oil Inventory is out at 10:30 AM 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 two year dived Lower at around 8:30 AM EST with no real economic news pending. The Dow climbed 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 8:30 AM EST and the Dow climbed Hier 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 20 ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT is now Dec '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 Mixed bias and the markets didn't disappoint as then Dow lost 250 points, but the other indices gained on the session.Today our bias is to the Upside.

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

Commentary

James Carville first said it and he was right. Americans vote with their pocketbooks and this year promised to bring a "blue wave" politically. The Democrats have taken the House and Senate and many governor races was won by the Dems.

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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