Markets make another U turn

USD: Jun '25 is Up at 98.425.  

Energies: Jul '25 Crude is Up at 72.83.

Financials: The Sep '25 30 Year T-Bond is Higher by 5 ticks and trading at 114.05.

Indices: The Jun '25 S&P 500 emini ES contract is 214 ticks Lower and trading at 5995.75.

Gold: The Aug'25 Gold contract is trading Up at 3441.60.

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 Lower and Crude is trading Higher which is 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 Lower with the exception of the Shanghai and Singapore exchanges.  Europe is trading Lower except the London exchange.

Possible challenges to traders

• Prelim UoM Consumer Sentiment is out at 10 AM EST.  This is Major.
• Prelim UoM Inflation Expectations is out at 8:30 AM EST.  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 8:30 AM EST with Unemployment Claims pending.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow dived Lower at 8:30 AM EST and the ZT 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 Long opportunity on the 2-year note, as a trader you could have netted about 20 plus ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Sep '25 and the Dow is still Jun '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Sep 25 - 6/12/25

Dow - Jun 2025- 6/12/25

Bias

Yesterday we gave the markets a Downside bias as the Bonds and Gold were Higher.  The markets however had other ideas as the Dow gained 101 points on the session and the other indices closed Higher as well.  Today we aren't dealing with a correlated market, and our bias is to the Downside.

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

Commentary

The markets closed Higher yesterday.  Why?  Unemployment Claims came in Higher than expected so perhaps traders are starting to think that the Federal Reserve may lower rates sooner as opposed to later?  This is purely subjective, but the worse news reported will lead traders to think that the Fed will lower.