Markets lower mainly

Nick Mastrandrea Market Tea Leaves

USD: Sep '23 is Up at 100.780.

Energies: Aug '23 Crude is Up at 76.53.

Financials: The Sep '23 30 Year T-Bond is Up 5 ticks and trading at 126.11.

Indices: The Sep '23 S&P 500 emini ES contract is 48 ticks Higher and trading at 4577.50.

Gold: The Aug'23 Gold contract is trading Down at 1965.80. Gold is 51 ticks Lower than its close.

Initial conclusion

This is not a correlated market. The USD is Up and Crude is Up which is not normal, and the 30 Year T-Bond is trading Higher. 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 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. At the present time Asia is trading Lower with the exception of the Hang Seng and Singapore exchanges which are Higher. Currently all of Europe is trading Higher with the exception of the German Dax.

Possible challenges to traders

No Economic news to speak of
Lack of Major economic news

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 migrated Lower at around 9:15 AM EST as the S&P Moved Higher around the same time. If you look at the charts below the S&P gave a signal at around 9:15 AM and the ZN started its Downward descent. Look at the charts below and you'll see a pattern for both assets. S&P hit a Low at around 9:15 AM and migrated Higher. 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 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Sept '23. The S&P contract is now Sep' 23. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN - Sept 2023 - 7/20/23

S&P - Sep 2023 - 7/20/23

Bias

Yesterday we gave the markets a Downside bias as we didn't see much in the way of upward direction Thursday morning. The markets almost achieved a complete downside day. The Dow closed Higher by 164 points, but the other indices all dropped on the day. Today we aren't dealing with a correlated market and our bias is Neutral or Mixed.

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

Commentary

Yesterday we suggested a Downside Day and we were correct in that 70 percent of the market dropped. However the Dow continued it's upward climb and I suspect the Smart Money had something to do with it. During the dark days of the financial meltdown in 2008/2009 Smart Money put together PPT, the Plunge Protection Team to prevent the markets from falling too far to the downside. They would take an index like the Dow and let it fall no further than a set number of points and then buy into with a vengeance. So they would short it on the way down and then buy on the way up. Understand that they have the capital to do this, when they buy or sell anything, they don't use two contracts. IT's more like thousands at a clip. Today we have no economic news to drive the markets one way or another. So, we need to be mindful of this if trading today, because anything can happen in a volatile market.

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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