This is not a correlated market. The USD is Down and Crude is Up which is 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 Higher which is not correlated. Gold is trading Lower which is not 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. Asia traded Higher except the Sensex and Shanghai exchanges. Currently all of Europe is trading Lower except the London exchange.

Possible challenges to traders

Capacity Utilization Rate is out at 9:15 AM EST. This is Major.
Industrial Production m/m is out at 9:15 AM EST. This is Major.
NAHB Housing Market Index is out at 10 AM EST. This is Major.
FOMC Member Bowman Speaks at 11 AM EST. This is Major.
FOMC Member Jefferson Speaks at 3:30 PM EST. This is 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 an Upside bias, and the markets didn't disappoint. The Dow closed Higher by 310 points and the other indices closed Higher as well. 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 Up, and it did. As suggested the markets did go Up. The eco news reported yesterday was good and we believe this helped to propel the markets.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD flirts with daily highs near 1.1620

EUR/USD now manages to regain upside impulse, extending its bounce to the 1.1630 region, or daily tops, always on the back of the renewed selling pressure on the US Dollar. Meanwhile, investors gear up for a busy US docket as well as comments from Fed officials.

GBP/USD advances modestly, reclaims 1.3400

The better tone in the risk complex helps the British Pound on Friday, motivating GBP/USD to reclaim the 1.3400 hurdle and beyond on the back of the modest pullback in the Greenback. Moving forward, traders are expected to closely follow results from key US data releases.

Gold loses momentum, back to $4,600

Gold adds to Thursday’s small decline and revisits the $4,600 region per troy ounce at the end of the week. The precious metal’s corrective move comes on the back of easing geopolitical tensions as well as some improvement in the risk-linked universe.