This is not a correlated market. The USD is Up and Crude is Down which is normal, and the 30 Year T-Bond is trading Higher. 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 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. Asia traded Higher except the Sensex and Shanghai exchanges. Currently all of Europe is trading Mixed at this time.

Possible challenges to traders

Unemployment Claims are out at 8:30 AM EST. This is Major.
Empire State MFG Index is out at 8:30 AM EST. This is Major.
Philly Fed MFG Index is out at 8:30 AM EST. This is Major.
Import Prices m/m is out at 8:30 AM EST. This is Major.
FOMC Member Bostic Speaks at 8:35 AM EST. This is Major.
FOMC Member Barr Speaks at 9:15 AM EST. This is Major.
Natural Gas Storage is out at 10:30 AM EST. This is Major.
FOMC Member Barkin Speaks at 12:40 PM.This is Major.
FOMC Member Schmid Speaks at 1:30 PM. This is Major.
TIC Long Term Purchases is out at 4 PM EST. This is not Major.

Traders, please note that we've changed the Bond instrument from the 10 Year (ZN) to the 2 Year (ZT). They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract. The YM contract is the Dow Jones Industrial Average, 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 ZT climbed Higher at around 9:15 AM EST with the all-important PPI data released at that time. The Dow dived Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT climbed Higher at around 9:15 AM EST and the Dow dived Lower at around the same time. These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 2-year note, as a trader you could have netted about a dozen plus ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT and YM are both Mar '26. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

Bias

Yesterday we gave the markets a Downside bias, and the markets didn't disappoint. The Dow closed Lower by 42 points and the other indices closed Lower as well. The Nasdaq dropped 238 points. 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 made a call for the markets to go down, and it did so hours before the markets opened. As suggested the markets did go down. The news out of DC isn't too encouraging and we believe this helped to derail the markets.

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 jumps above $5,000 as China's gold buying drives demand

Gold price rises to near $5,035 during the early Asian session on Monday. The precious metal extends its recovery amid a weaker US Dollar and rising demand from central banks. The delayed release of the US employment report for January will be in the spotlight later on Wednesday.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

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.