US Dollar: Dec '21 USD is Down at 93.630.

Energies: Dec '21 Crude is Up at 82.80.

Financials: The Dec '21 30 Year bond is Down 1 tick and trading at 157.24.

Indices: The Dec '21 S&P 500 Emini ES contract is 14 ticks Lower and trading at 4538.25.

Gold: The Dec'21 Gold contract is trading Up at 1793.50. Gold is 116 ticks Higher 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 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

TYAZ21

ZN - Dec 2021 - 10/21/21

EPZ21

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.

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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