Nick Mastrandrea
Market Tea Leaves
US Dollar: Sept '21 USD is Up at 92.965.
Energies: Aug '21 Crude is Down at 71.90.
Financials: The Sept '21 30 Year bond is Down 19 ticks and trading at 163.29.
Indices: The Sept '21 S&P 500 emini ES contract is 76 ticks Higher and trading at 4378.50.
Gold: The Aug'21 Gold contract is trading Down at 1803.70. Gold is 17 ticks Lower than its close.
Initial conclusion
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 bonds should follow and vice-versa. The S&P is Higher and Crude is trading Lower which is 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. Asia is trading Mixed. All of Europe is trading Higher.
Possible challenges to traders today
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Flash Manufacturing PMI is out at 9:45 AM EST. This is Major.
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Flash Services PMI is out at 9:45 AM EST. This is Major
Bias
Yesterday we gave the markets an Upside bias as both Gold and the Bonds were trading Lower Thursday morning. The economic news reported wasn't stellar either but the Dow closed 25 points Higher and the other indices traded Higher as well. Today we aren't dealing with a correlated market and bias is to the upside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Yesterday we gave the markets an Upside bias as it was correlated that way. The Bonds and Gold were both trading Lower and this usually reflects as Upside day. The markets didn't disappoint however all the economic news didn't meet expectations. Unemployment claims were up (which isn't good) and came in at 419,000 versus 350,000 expected. Existing Home Sales didn't meet expectations, nor did CB Leading Index. So what's the point? Market Correlation usually beats out non stellar economic reports. Today we only have Flash Services and Manufacturing PMI (two separate reports).
Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.
There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.
In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.
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