US Dollar: Dec '21 USD is Down at 93.540.
Energies: Dec '21 Crude is Up at 82.65.
Financials: The Dec '21 30 Year bond is Down 9 ticks and trading at 159.09.
Indices: The Dec '21 S&P 500 emini ES contract is 53 ticks Higher and trading at 4490.75.
Gold: The Dec'21 Gold contract is trading Up at 1781.70. Gold is 160 ticks Higher than its close.
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 Higher which is not 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 all of Asia is trading Higher. Europe is trading Mixed at this time.
Possible challenges to traders today
Building Permits is out at 8:30 AM EST. This is Major.
Housing Starts is out at 8:30 AM EST. This is Major.
FOMC Member Daly Speaks at 11 AM EST. This is Major.
FOMC Member Bowman Speaks at 1:15 PM EST. Major.
Federal Budget Balance. This is Major.
FOMC Member Bostic Speaks at 2:50 PM EST. Major.
FOMC Member Waller Speaks at 3 PM EST. This is Major.
Traders please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.
We've elected to switch gears a bit and show 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 liken to a seesaw, when up goes up the other should go down and vice versa.
Yesterday the ZN made it's move at around 9:45 AM EST. The ZN hit a Low at around that time and the S&P moved Lower. If you look at the charts below ZN gave a signal at around 9:45 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. ZN hit a Low at around 9:45 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 10 year note, as a trader you could have netted about 20 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 it may be more apparent and visible.
Charts Courtesy of MultiCharts built on an AMP platform
ZN - Dec 2021 - 10/18/21
S&P - Dec 2021 - 10/18/21
Yesterday we gave the markets a Downside bias as the USD and Crude were trading Higher Monday morning. The Dow did trade Lower by 36 points however the S&P and Nasdaq both closed Higher, so it turned out to be a Mixed market after all. 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.
Yesterday the NAHB Housing Market Index was released and it shows a gain of 80 versus 75 prior. The markets always like it when real estate come in strong as there is strong correlation between the financial markets and real estate. Strong real estate numbers means banking activity in terms of loans and mortgages as well as all the items needed to build or maintain a home. Think about it even if you bought a pre existing home you would probably change the flooring, paint, change old appliances (dishwasher, washer and dryer, etc.). Today we have Building Permits and Housing Starts; again real estate related. Will this help to set market direction? Only time will tell.....
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.