This is not a correlated market. The dollar is Up, and Crude is Down which is normal, but the 30-year Bond is trading Lower. 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 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. All of Asia is trading Lower at the present time. All of Europe is trading Lower as well.

Possible challenges to traders today

Goods Trade Balance is out at 8:30 AM EST. This is Major.
Prelim Wholesale Inventories is out at 8:30 AM EST. Major.
Pending Home Sales is out at 10 AM EST. Major
FOMC Member Bullard Speaks at 10:10 AM EST. Major.
Fed Chair Powell Speaks at 10:15 AM EST. Major.
Crude Oil Inventories is out at 10:30 AM EST. Major.
FOMC Member Bowman Speaks at 11 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 ZN made its move at around 10:40 AM EST. The ZN hit a High at around that time and the S&P moved Higher at around the same time. If you look at the charts below ZN gave a signal at around 10:40 AM and the S&P moved Higher 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 10:40 AM and the S&P was moving Higher 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 Short opportunity on the 10-year note, as a trader you could have netted about 20 plus 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 - 09/27/22

S&P - Dec 2022 - 9/27/22

Bias

Yesterday we gave the indices an Upside bias as the USD was down and the indices were trading Higher Tuesday morning. The markets closed Mixed as the Dow was down by 126 points, the S&P down by 8 points but the Nasdaq rose 27 points on the session. Today we aren't dealing with a correlated market and our bias is Neutral.

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

Commentary

It would appear as though the markets are continuing to suffer due to fear of recession. As we explained previously traders on the street are concerned that the Fed will tighten too quickly with a lrger than expected rate hike. Yesterday we felt certain that the markets would trend Higher after 6 sessions of down markets. Prior to 12 noon this would be correct as the indices did trade Higher but then collapsed as the session wore on. The bright spot is that at least the Nasdaq did trade Higher. What the markets need is some kind of reassurance that rates will stabilize, and that recession can be avoided. Someone like Fed Chair Powell might do.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.