This is not a correlated market. The dollar is Down, and Crude is Down which is not normal, but the 30 Year T-Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower, then the bonds should follow and vice-versa. The S&P is Lower, and Crude is trading Lower which is not correlated. Gold is trading Lower which is not 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. Currently all of Asia is trading Lower. All of Europe is trading Lower with the exception of the German Dax exchange which is Higher.

Possible challenges to traders today

Average Hourly Earnings is out at 8:30 AM EST. This is Major.
Non-Farm Employment Change is out at 8:30 AM EST. Major.
Unemployment Rate is out at 8:30 AM EST. 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 likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the Bonds hit a Low at around 10:30 AM EST. The S&P hit a High at around that time and the Bonds moved Higher shortly thereafter. If you look at the charts below ZN gave a signal at around 10:30 AM and the S&P gave a signal at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 10:30 AM and the S&P moved Lower 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 Long opportunity on the 10-year note, as a trader you could have netted about 30 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '22. The S&P contract is also Dec' 22. 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

ZN - Dec 2022 - 12/01/22

S&P - Dec 2022 - 12/01/22

Bias

Yesterday we gave the markets a Downside bias as only the USD was trading Lower Thursday morning and everything else was Higher. This usually reflects a Downside Day and the markets mostly didn't disappoint. The Dow closed Lower by 195 points, the S&P Lower by 4 but the Nasdaq closed Higher by about 14. Given that today is Jobs Friday our bias is Neutral or Mixed.

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

Commentary

Yesterday we had fairly decent economic reports in that Unemployment Claims were Lower (which is positive) and Personal Income and Spending were both Higher as well and this is good because consumer spending is the major substance of a robust economy. So, if the economic news was good why did the markets falter yesterday? My only answer to that is "it was correlated that way." Any follower of this newsletter should know that over the course of time rules of market correlation override simple logic. This has been the major reason as why certain things happen that don't at first glance make any sense. Do these rules work 100% of the time? No. Anyone who tells you their stuff works 100 percent of the time isn't being honest. Today our bias is Neutral because it is Jobs' Friday and historically speaking the markets have never behaved with any sense of normalcy on this day.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hovers around nine-day EMA above 1.1800

EUR/USD remains in the positive territory after registering modest gains in the previous session, trading around 1.1820 during the Asian hours on Monday. The 14-day Relative Strength Index momentum indicator at 54 is edging higher, signaling improving momentum. RSI near mid-50s keeps momentum balanced. A sustained push above 60 would firm bullish control.

GBP/USD holds medium-term bullish bias above 1.3600

The GBP/USD pair trades on a softer note around 1.3605 during the early European session on Monday. Growing expectation of the Bank of England’s interest-rate cut weighs on the Pound Sterling against the Greenback.

Gold sticks to gains above $5,000 as China's buying and Fed rate-cut bets drive demand

Gold surges past the $5,000 psychological mark during the Asian session on Monday in reaction to the weekend data, showing that the People's Bank of China extended its buying spree for a 15th month in January. Moreover, dovish US Federal Reserve expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle

Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Bitcoin, Ethereum, and Ripple prices consolidated on Monday after correcting by nearly 9%, 8%, and 10% in the previous week, respectively. BTC is hovering around $70,000, while ETH and XRP are facing rejection at key levels. Traders should be cautious: despite recent stabilization, upside recovery for these top three cryptocurrencies is capped as the broader trend remains bearish.