This is not a correlated market. The USD is Down and Crude is Up which is 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 Higher and Crude is trading Lower which is correlated. Gold is trading Higher 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 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. All of Asia traded Higher. Currently all of Europe is trading Higher as well.

Possible challenges to traders

FOMC Member Barkin Speaks at 8 AM EST. This is Major.
FOMC Member Bowman Speaks at 9:40 AM EST. This is Major.
Jolts Job Openings is tentative. This is Major.
RCM/TIPP Economic Optimism is tentative. This is Major.
Wards Total Vehicle Sales by brand - All Day 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 dived Lower at around 8:30 AM EST with no real economic reports. 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 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 Short opportunity on the 2-year note, as a trader you could have netted a dozen plus ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT and YM are both Mar '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 -Mar 26 - 2/02/26

Dow - Mar 2026- 2/02/26

Bias

Yesterday we gave the markets a Downside bias, but the markets had other ideas as the Dow closed Higher by 401 points and the other indices closed Higher as well. Today we are dealing with a nearly correlated market, and our bias is to the Upside.

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

Commentary

Yesterday morning it appeared that the markets would migrate Lower as it was correlated in that direction. The markets decided to flip that and close Higher. Want to learn Market Correlation and determine market direction hours before the Opening Bell?

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD struggles to hold above 1.1800 as USD stabilizes

EUR/USD loses its recovery momentum and retreats below 1.1800 in the second half of the day on Tuesday. The US Dollar finds a foothold after staying under pressure in the early European session, limiting the pair's upside in the near term.

GBP/USD pares gains below 1.3700 as mood turns cautious

GBP/USD enters a consolidation phase and holds steady near 1.3650 after rising above 1.3700 to start the European session. The cautious market mood seems to be making it difficult for Pound Sterling to outperform the US Dollar, while investors refrain from taking large positions ahead of the Bank of England's policy meeting later in the week.

Gold gathers recovery momentum, climbs above $4,900

Gold recovers further from its lowest level since January 6 and trades above $4,900, rising about 6% on a daily basis. The US Dollar holds steady following Monday's advance but XAU/USD preserves its bullish momentum, possibly supported by dip-buying that came after the sharp decline.

Hyperliquid rallies as HIP-4 proposal supports prediction market

Hyperliquid (HYPE) extended its recovery by 8% at press time on Tuesday, driven by the HIP-4 proposal to add outcome trading, referring to prediction markets and bounded options contracts.

Japan’s snap elections: The fiscal credibility test and the market playbook

Japan has opted for a snap election on 8 February 2026 rather than waiting for the normal electoral calendar, which makes this a faster, higher-stakes reset of political mandate.

Ripple slides as low retail, institutional demand weigh

Ripple edges lower, trading marginally below $1.60 at the time of writing on Tuesday as bulls and bears battle for control. The cross-border remittance token rose to $1.66 on Monday, but profit-taking and risk-off sentiment in the broader crypto market led to the ongoing correction.