Markets take a dip

USD: Jun '25 is Up at 99.750.  

Energies: Jul '25 Crude is Down at 60.46.

Financials: The Jun '25 30 Year T-Bond is Higher by 1 tick and trading at 110.26.

Indices: The Jun '25 S&P 500 emini ES contract is 24 ticks Higher and trading at 5867.25.

Gold: The Jun'25 Gold contract is trading Down at 3295.20.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is 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 Higher and Crude is trading Lower which is correlated. Gold is trading Lower 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. All of Asia traded Higher with the exception of the Nikkei exchange which is Lower.  All of Europe is trading Lower except the London exchange which is Higher.

Possible challenges to traders

• Unemployment Claims are out at 8:30 AM EST.  This is Major.

• Flash Manufacturing PMI is out at 9:45 AM EST. This is Major.

• Flash Services PMI is out at 9:45 PM EST.  This is Major.

• Existing Home Sales is out at 10 AM EST.  This is Major.

• Natural Gas Storage is out at 10:30 AM EST.  This is Major.

• FOMC Member Williams Speaks at 2 PM 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 dived Lower at around 8 AM EST with no news pending.  The Dow climbed Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8 AM EST and the ZT dived Lower 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 Short opportunity on the 2-year note, as a trader you could have netted a dozen plus ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Jun '25 and the Dow is Jun '25 as well.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

ZT -Jun 2025 - 5/21/25

Dow - Jun 2025- 5/21/25

Bias

Yesterday we gave the markets a Neutral or Mixed bias meaning the markets could go in any direction.  The markets veered to the Downside yesterday as the Dow dropped 192 points and the other indices lost 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 the markets continued its downward slide as the indices all closed Lower on Wednesday.   Want to learn Market Correlation and determine market direction hours before the Opening Bell?