This is not a correlated market. The USD is Down and Crude is Down which is not normal, but the 30 Year T-Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is Higher, then the bonds should follow and vice-versa. The S&P is Higher and Crude is trading Lower 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. All of Asia is trading Lower. All of Europe is trading Lower as well.

Possible challenges to traders

Core Durable Goods Orders m/m is out at 8:30 AM EST. This is Major.
Durable Goods Orders m/m is out at 8:30 AM EST. This is Major.
FOMC Member Waller Speaks at 9:35 AM EST. This is Major.
Revised UoM Consumer Sentiment is out at 10 AM EST. This is not Major.
Revised UoM Inflation Expectations is out at 10 AM EST. This is not Major.

Treasuries

Traders, please note that we've changed the Bond instrument from the 2 year (ZT) 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 Treasury notes (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 migrated Higher at around 9 AM EST as the S&P hit a High at around that time and the ZN migrated Higher. If you look at the charts below the ZN gave a signal at around 9 AM and started its Upward climb. Look at the charts below and you'll see a pattern for both assets. S&P moved Lower at around 9 AM and the ZN moving Higher at around 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 10-year note, as a trader you could have netted about 10 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for both the ZN and the S&P are now Jun '24. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN -Jun 2024 - 05/23/24

S&P - Jun 2024 - 05/23/24

Bias

Yesterday we gave the markets an Upside bias, but the markets had other plans. The Dow dropped dramatically after 10 AM EST and didn't migrate into positive territory at all yesterday. The other indices didn't fare better either. 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

Yesterday we were all setup for an Upside Day. The markets were correlated to the Upside and upon market open it migrate Higher. However, a funny thing happened after 10 AM EST. The New Home Sales numbers were released, and it showed a shortfall in new homes being sold in the USA. The number came in at 634,000 versus 677,000 predicted. The markets dropped into negative territory and did not recover at any time during the session. And as we always say, this too can change. Monday is of course Memorial Day and we all get a day off. However if you know a Veteran or run into one give them thanks for their service. They bought the freedom that we enjoy. We'll be back on Tuesday the 28th. Enjoy and have a safe holiday!!!

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD climbs to daily highs near 1.1820

EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.

GBP/USD trims losses, retests 1.3460

After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.

Gold flirts with four-week highs past $5,200

Gold extends its rebound, climbing for a third consecutive session and pushing back above the $5,200 mark per troy ounce on Friday. The move higher continues to draw support from lingering geopolitical tensions and the ongoing uncertainty surrounding US trade policy, both of which are keeping safe-haven demand firmly in play.

Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias

Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.

Breaking: US and Israel attack Iran, risk aversion to sweep global markets

Early Saturday, United States (US) President Donald Trump announced that the US had begun “major combat operations” in Iran, following Israel’s pre-emptive missile attacks against Tehran.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.