This is not a correlated market. The dollar is Up+ and Crude is Down- 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 Lower which is not correlated. Gold is trading Higher which is not correlated with the US dollar trading Up. 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 Lower with the exception of the Indian Sensex which is Higher at this time. Currently all of Europe is trading Lower.

Possible Challenges To Traders Today

FOMC Member Williams Speaks at 8:45 AM EST. This is major.
HPI m/m is out at 9 AM EST. Major.
S&P/CS Composite-20 HPI y/y is out at 9 AM EST. This is major.
CB Consumer Confidence is out at 10 AM EST. This is major.
Richmond Manufacturing Index is out at 10 AM EST. Major.
New Home Sales is out at 10 AM EST. Major.
Fed Chair Powell Speaks at 1 PM EST. This is major.
FOMC Member Bullard Speaks at 6:30 PM EST. No Impact after hours.

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) and The YM futures contract. The YM contract is the DJIA 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 ZB made a major move at around 9:15 AM EST. The ZB hit a Low at around that time and the YM hit a High. If you look at the charts below ZB gave a signal at around 9:15 AM EST and the YM was moving Lower at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 9:15 AM and the YM was moving Lower at the same time. 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 30 year bond, as a trader you could have netted about 10 plus ticks per contract on this trade. Each tick is worth $31.25. Please note: the front month for both the ZB and YM contract is now September, 2019 and 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.

Bias

Yesterday we maintained a Neutral bias as the indices didn't reflect any sense of direction. Every instrument was trading Higher yesterday morning the USD. The Dow traded Higher by 8 points but the other indices lost ground. Today we aren't dealing with a correlated market however our bias is to the Downside.

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

Commentary

Yesterday we witnessed the phenomenon of all boats rising, meaning all instruments rise or fall together. Every instrument we track was trading up except the USD. We maintained a Neutral bias as our experience has shown that the markets don't operate with any sense of normalcy on a day like yesterday. On another note both President Trump and Chinese President XI will be attending the G20 meeting in Tokyo on the 28th where it's expected that China and the US will reach an accord on trade. But as in all things only time will tell...

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.