Nick Mastrandrea
Market Tea Leaves
US Dollar: Jun '21 USD Up at 91.640.
Energies: Jun'21 Crude is Up at 63.70.
Financials: The June '21 30 year bond is Down 32 ticks and trading at 157.30.
Indices: The June'21 S&P 500 emini ES contract is 2 ticks Lower and trading at 4152.00.
Gold: The June'21 Gold contract is trading Up at 1767.00. Gold is 2 ticks Higher than its close.
Initial conclusion
This is not a correlated market. The dollar is Up+ and Crude is Up+ which is not normal but 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 Higher which is correlated. Gold is trading Higher which is not correlated with the US dollar trading Higher. 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 Higher. Currently, all of Europe is trading Higher as well.
Possible challenges to traders today
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Building Permits are out at 8:30 AM EST. This is Major.
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Housing Starts are out at 8:30 AM EST. This is Major.
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Prelim UOM Consumer Sentiment is out at 10 AM EST. This is Major.
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Prelim UOM Inflation Expectations is out at 10 AM EST. This is Major.
Bias
Yesterday we gave the markets a Neutral bias as we saw no correlation between the USD and the Bonds and we had about 14 major economic news reports to deal with. The Dow advanced 305 point and surpassed the 34,000 range. The other indices advanced as well. Today we aren't dealing with a correlated market and our bias is Neutral.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Yesterday we gave the Markets a Neutral or Mixed bias which means the markets could go anywhere and fortunately they advanced. They advanced because the economic news reported was good. Retail Sales, Core Retail Sales, Philly and Empire State Manufacturing Indices all advanced and jobless claims decreased for the first time in a while. The Dow advanced to surpass the 34,000 mark for the first time ever. Today we have Building Permits and Housing Starts; both of which are Major and proven market movers.
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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