Nick Mastrandrea
Market Tea Leaves
US Dollar: Dec '21 USD is Up at 93.415.
Energies: Nov '21 Crude is Up at 74.99.
Financials: The Dec '21 30 Year bond is Down 8 ticks and trading at 163.23.
Indices: The Dec '21 S&P 500 emini ES contract is 60 ticks Higher and trading at 4460.75.
Gold: The Dec'21 Gold contract is trading Down at 1751.30. Gold is 3 ticks Lower than its close.
Initial conclusion
This is not a correlated market. The dollar is Up and Crude is Up which is not 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 Lower which is 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. Currently Asia is trading Mixed with half the exchanges Higher and the other half Lower. All of Europe is trading Higher at this time.
Possible challenges to traders today
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FOMC Member Evans Speaks at 8 AM EST. This is Major.
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Core Durable Goods Orders is out at 8:30 AM EST. This is Major.
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Durable Goods Orders are out at 8:30 AM EST. This is Major
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FOMC Member Williams Speaks at 9 AM EST. Major
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FOMC Member Williams Speaks at 12 noon. Major.
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FOMC Member Brainard Speaks at 12:15 PM EST. Major.
Treasuries
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.
On Friday the ZN made it's move at around 8:15 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 8:15 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 8:15 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 20 plus 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
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ZN - Dec 2021 - 9/24/21
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S&P - Dec 2021 - 9/24/21
Bias
On Friday we gave the markets a Downside bias as the USD, Crude and Gold were all trading Higher Friday morning and that is indicative of an Downside day. The markets however had other ideas and the Dow closed 33 points Higher, the S&P 7 points Higher but the Nasdaq traded Lower. 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.
Commentary
The markets were poised to drop Lower Friday as the USD, Gold and Crude were all trading Higher Friday morning. The markets opened Lower and stayed there until 10 AM when New Home Sales was reported. New Home Sales handily exceeded expectation by coming in at 740,000 versus 712,000 expected. After this the markets rose and didn't look back. Today we have Durable Goods and a number of FOMC members speaking so time will tell what direction the markets will take.
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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Editors’ Picks
AUD/USD remained bid above 0.6500
AUD/USD extended further its bullish performance, advancing for the fourth session in a row on Thursday, although a sustainable breakout of the key 200-day SMA at 0.6526 still remain elusive.
EUR/USD faces a minor resistance near at 1.0750
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Gold holds around $2,330 after dismal US data
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Bitcoin price continues to get rejected from $65K resistance as SEC delays decision on spot BTC ETF options
Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
US economy: slower growth with stronger inflation
The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.