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 Lower and Crude is trading Higher 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. Currently, Asia is trading Higher with the exception of the Shanghai and Sensex exchanges. All of Europe is trading Higher with the exception of the Spanish IBEX.

Possible challenges to traders today

Flash Manufacturing PMI is out at 9:45 AM EST. This is Major.
Flash Services PMI is out at 9:45 AM EST. This is Major.
FOMC Member Daly Speaks at 10 AM EST. This is Major.
Fed Chair Powell Speaks out at 11 AM EST. This is Major.
Federal Budget Balance is Major. No Timeframe for release.
Treasury Currency Report is Major. No Timeframe for release.

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 years (ZB) to the 10 years (ZN). They work exactly the same.

We've elected to switch gears a bit and show a correlation between the 10-year bond (ZN) 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 likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZN made its move at around 9 AM EST. The ZN hit a High at around that time and the S&P moved Higher. If you look at the charts below ZN gave a signal at around 9 AM EST and the S&P moved Higher at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a High at around 9 AM EST and the S&P was moving Higher 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 Shorting opportunity on the 10-year note, as a trader you could have netted about 16 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '21. The S&P contract is now Dec '21 as well. I've changed the format to Renko bars such that they may be more apparent and visible.

Charts Courtesy of MultiCharts built on an AMP platform

ZN - Dec 2021 - 10/21/21

S&P - Dec 2021 - 10/21/21

Bias

Yesterday we gave the markets a Downside bias as the USD and Gold were both trading Higher and this usually doesn't bode well for an Upside day hence the Downside bias. The Dow traded Lower by 6 points but the S&P and Nasdaq both closed Higher. Today we aren't dealing with a correlated market and our bias is Neutral or Mixed.

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

Commentary

Yesterday the news report wasn't stellar but in fact, was mixed. Unemployment Claims and Existing Home Sales were positive but Philly Fed Manufacturing Index and Leading Index were both Lower so we had mixed economic news and mixed results.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD looks offered below 1.1900

EUR/USD keeps its bearish tone unchanged ahead of the opening bell in Asia, returning to the sub-1.1900 region following a firmer tone in the US Dollar. Indeed, the pair reverses two consecutive daily gains amid steady caution ahead of Wednesday’s key US Nonfarm Payrolls release.

GBP/USD slips back to daily lows near 1.3640

GBP/USD drops to daily lows near 1.3640 as sellers push harder and the Greenback extends its rebound in the latter part of Tuesday’s session. Looking ahead, the combination of key US releases, including NFP and CPI, alongside important UK data, should keep the pound firmly in focus over the coming days.

Gold the battle of wills continues with bulls not ready to give up

Gold remains on the defensive and approaches the key $5,000 region per troy ounce on Tuesday, giving back part of its recent two day. The precious metal’s pullback unfolds against a firmer tone in the US Dollar, declining US Treasury yields and steady caution ahead of upcoming key US data releases.

Bitcoin's downtrend caused by ETF redemptions and AI rotation: Wintermute

Bitcoin's (BTC) fall from grace since the October 10 leverage flush has been spearheaded by sustained ETF outflows and a rotation into the AI narrative, according to Wintermute.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

XRP holds $1.40 amid ETF inflows and stable derivatives market

Ripple trades under pressure, with immediate support at $1.40 holding at the time of writing on Tuesday. A recovery attempt from last week’s sell-off to $1.12 stalled at $1.54 on Friday, leading to limited price action between the current support and the resistance.