Markets reverse gains

US Dollar: Sept USD Up at 96.485.

Energies: Aug'20 Crude is Down at 39.72.

Financials: The Sept'20 30 year bond is Up 12 ticks and trading at 180.00.

Indices: The Sept S&P 500 emini ES contract is 44 ticks Higher and trading at 3159.25.

Gold: The Aug'20 Gold contract is trading Down at 1804.00.  Gold is 100 ticks Lower than its close.

 

Initial Conclusion

This is not a correlated market. The dollar is Down- and Crude is Up+ which is normal and 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 Higher which is 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.

At this time all of Asia is trading Lower. Currently all of Europe is trading Lower as well.

 

Possible Challenges To Traders Today:

• NFIB Small Business Index is out at 6 AM EST. This is Major.
• CPI is out at 8:30 AM EST. This is Major.
• Core CPI is out at 8:30 AM EST. This is Major.
• FOMC Member Brainard Speaks at 2 PM EST. This is Major.

 

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) 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 liken to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZB made it's move at around 8:15 AM EST. The ZB hit a Low at around that time and the S&P moved Lower. If you look at the charts below ZB gave a signal at around 8:15 AM EST and the S&P moved Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 8:15 AM EST and the S&P was moving Lower shortly thereafter. 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 Long opportunity on the 30 year bond, as a trader you could have netted about 30 ticks per contract on this trade. Each tick is worth $31.25. Please note: the front month for the ZB is now Sept '20. The S&P contract has been changed to Sept '20. I've changed the format to Renko bars such that it may be more apparent and visible.

Charts Courtesy of MultiCharts built on an AMP platform.

 

Bias

Yesterday we gave the markets an Upside bias as the USD and the Bonds were trading Lower and this usually results in an Upside day. Whereas the Dow did gain about 11 points, the other indices faltered and closed Lower. Today we aren't dealing with a correlated market and our bias is Neutral.

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

 

Commentary

Yesterday morning the markets were poised to advance as the USD, Bonds and Crude were all trading Lower which would bode well for an Upside day and initially the markets all traded Higher. But then news came out that California was changing its reopening plan for its economy as the number of Covid 19 cases and deaths all rose. This sent the markets lower and what's amazing here is the Secretary of Education Betsy DeVos claiming over the weekend that school systems that don't open in September won't receive any Federal funding. So that's we resort to: blackmail. So if I as a parent don't feel my child is safe I have no recourse except to send my child to school? Something very wrong with that. The Federal government should increase funding to insure that school have and are practicing the protocols required for safety. Masking, temperature taking, safe distancing and hand sanitizers make a difference yet this administration wants to bury its head in the sand and pretend that none of this exists. I just hope the American people wake up.