Markets take a dive

Nick Mastrandrea Market Tea Leaves

USD: Dec '26 is Down at 101.520.

Energies: Dec '26 Crude is Down at 99.84.

Financials: The Dec '26 30 Year T-Bond is Higher by 7 ticks and trading at 107.28

Indices: The Sep '26 S&P 500 emini ES contract is 136 ticks Higher and trading at 7648.25

Gold: The Dec'26 Gold contract is trading Up at 3910.20.

Initial conclusion

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 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 Up 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 goes Up the other goes Down. Asia traded Mixed. Europe is trading Mixed.

Possible challenges to traders

Final Manufacturing PMI is out at 9:45 AM EST. Major.
ISM Manufacturing PMI is out at 10 AM EST. Major.
Construction Spending is out at 10 AM EST. Major.
ISM Manufacturing Prices is out at 10 AM EST. Major.

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.

On Friday the two year dived Lower at around 8 AM EST with no real economic news pending. The Dow climbed Higher at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT dived lower at around 8 AM EST and the Dow climbed Higher 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 about 20 ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT is now Dec '26. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

ZT -Dec 26 - 10/30/26

Dow - Dec 2026- 10/30/26

Bias

On Friday we gave the markets a Neutral or Mixed bias but the markets veered to the Downside. The Dow dropped 572 points, and the other indices lost ground as well. Today our bias is to the Upside.

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

Commentary

On Friday we suggested a Mixed day but the markets dived to the Downside. Ready to use Market Correlation to make you a better trader?

Author

Nick Mastrandrea

Market Tea Leaves

Nick Mastrandrea over 20 years experience in trading and formerly held a NASD Series 7. He currently holds a NJ Life, Health and Variable Authority. Nick is a published writer and his work has appeared in Futures Magazine, TraderPlanet and others.

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