Jobs Friday

USD: Dec '24 is Up at 104.030.

Energies: Dec '24 Crude is Up at 70.58.

Financials: The Dec '24 30 Year T-Bond is Down 2 ticks and trading at 117.29.

Indices: The Dec '24 S&P 500 emini ES contract is 98 ticks Higher and trading at 5763.00.

Gold: The Dec'24 Gold contract is trading Up at 2762.60.

Initial conclusion

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 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 traded mainly Lower with the exception of the Hang Seng trading Higher.  All of Europe is trading Higher. 

Possible challenges to traders

• Average Hourly Earnings m/m is out at 8:30 AM EST.  This is Major.

• Non-Farm Employment Change is out at 8:30 AM EST.  This is Major.

• Unemployment Rate is out at 8:30 AM EST.  This is Major.

• Final Manufacturing PMI is out at 9:45 AM EST.  This is Major.

• ISM Manufacturing PMI is out at 10 AM EST.  This is Major.

• ISM Manufacturing Prices is out at 10 AM EST.  This is Major.

• Construction Spending is out at 10 AM EST.  This is Major.

• Wards Total Vehicle Sales - All Day by Brand.  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 9 AM EST as the Eco news was released.  The Dow slide Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 9 AM and the ZT moved 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 about 30 plus ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is Dec and the Dow is now Dec '24.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of Barcharts

ZT -Dec 2024 - 10/31/24

Dow - Dec 2024- 10/31/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias as we saw no evidence of Market Correlation Thursday morning.  The markets traded to the Downside as the Dow closed 378points Lower and the other indices closed Lower as well.  Given that today is Jobs Friday, we will maintain our Neutral Bias.

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

Commentary

So, the economic news was released and the markets drifted Lower.  Why?  We can't really say because the news reported wasn't terrible.  The only thing we can think is Election Day jitters, especially given that this is a Presidential Election.  I think everyone in the financial arena wants Trump to win that that may not be the case.  Today is Jobs Friday so our bias is Neutral simply because the markets have never shown any sense of normalcy on this day.  Will the news propel the markets forward?  Only time will tell...