This is not a correlated market. The USD is Down and Crude is Down which is not normal, but the 30 Year T-Bond is trading Up. 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 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. Asia trading mainly Mixed. All of Europe is trading mainly Higher except the London exchange.

Possible challenges to traders

FOMC Member Waller Speaks at 9:15 AM EST. This is Major.
CB Leading Index m/m is out at 10 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 10-year Treasury notes (ZN) 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.

On Friday the ZT migrated Higher at around 8:30 AM EST. If you look at the charts below the ZT gave a signal at around 8:30 AM after the 8:30 AM reports were released and started its Upward climb. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM and the ZT moved Higher at around the same time. These charts represent the newest version of BarCharts, 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 30 plus ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is Sept and the Dow is now Sept '24. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Sept 2024 - 08/16

Dow - Sept 2024- 08/16/24

Bias

On Friday we gave the markets a Downside bias as we didn't see any semblance of Market Correlation. The markets had other ideas as the Dow gained 97 points and the other indices gained ground as well. 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

On Friday we witnessed a continuation of what we saw on Thursday, the markets up on the economic plan and policy of the Democrats. They have promised much for the time ahead but are very light on telling us how all of this will be paid for. The Republicans do the same thing so the question is who will keep their word and who won't. Today we are light on economic news as we only have two reports. Leading Index and an FOMC member speaking. Today the Democratic National Convention starts so it's now the Dems turn.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD flat lines around 1.1900; looks to US NFP report for fresh directional impetus

The EUR/USD pair is seen oscillating in a narrow trading band around the 1.1900 mark during the Asian session on Wednesday as traders opt to wait for the release of US monthly employment details before placing fresh directional bets.

GBP/USD slips back to daily lows near 1.3640

GBP/USD drops to daily lows near 1.3640 as sellers push harder and the Greenback extends its rebound in the latter part of Tuesday’s session. Looking ahead, the combination of key US releases, including NFP and CPI, alongside important UK data, should keep the pound firmly in focus over the coming days.

Gold recovers to $5,050, focus shifts to US jobs data

Gold turns higher to test $5,050 in the Asian session on Wednesday. Traders assess whether Gold has found a floor following a historic sell-off. The delayed US employment report for January, which was pushed back due to the recently ended four-day government shutdown, will take center stage later on Wednesday.

Ethereum: Whales buy the dip amid rising short bets

Following one of Ethereum's largest weekly drawdowns, whales are slowly returning to action alongside a drop in retail selling pressure. After slightly selling into the decline at the start of the month, whales or wallets with a balance of 10K-100K ETH began buying the dip last Wednesday as prices crashed further.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

XRP holds $1.40 amid ETF inflows and stable derivatives market

Ripple trades under pressure, with immediate support at $1.40 holding at the time of writing on Tuesday. A recovery attempt from last week’s sell-off to $1.12 stalled at $1.54 on Friday, leading to limited price action between the current support and the resistance.