Nick Mastrandrea
Market Tea Leaves
US Dollar: Sept '21 USD is Up at 93.020.
Energies: Aug '21 Crude is Up at 68.01.
Financials: The Sept '21 30 Year bond is Down 25 ticks and trading at 164.20.
Indices: The Sept '21 S&P 500 emini ES contract is 78 ticks Higher and trading at 4335.00.
Gold: The Aug'21 Gold contract is trading Down at 1806.80. Gold is 46 ticks Lower than its close.
Initial conclusion
This is not a correlated market. The dollar is Up+ and Crude is Up+ which is not 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 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. All of Asia is trading Lower. Conversely all of Europe is trading Higher with the exception of the Milan exchange which is Lower at this time.
Possible challenges to traders today
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Crude Oil Inventories are out at 10:30 AM EST. This is Major.
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No other Major economic news to speak of.
Bias
Yesterday we gave the markets a Neutral bias as we didn't see much in the way of correlation Tuesday morning. The markets migrated to the Upside with the Dow regaining 550 points and the other indices gained ground as well. Today we aren't dealing with a correlated market and our bias is to the Upside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Yesterday we didn't see much in the way of market correlation and as such gave the markets a Neutral or Mixed bias which means the markets could go anywhere. Gratefully the markets decided to rebound and gravitate to the Upside with the Dow regaining 550 points, the S&P about 65 and the Nasdaq 224. So we witnessed a rebound or a dead cat bounce whereby the markets move down and then finally reverses and migrates higher. Time will tell if this continues or if we move into the situation of one day up, next day down. We hope that doesn't occur as it may work for a while until it doesn't. From our perspective we will continue to do what we do in terms of analyzing the markets as they stand. Today we only have crude oil inventories on the docket in terms of economic news.
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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