Nick Mastrandrea
Market Tea Leaves
US Dollar: Jun '21 USD is Down at 90.150.
Energies: Jun'21 Crude is Up at 65.13.
Financials: The June '21 30 year bond is Down 5 ticks and trading at 157.26.
Indices: The June'21 S&P 500 emini ES contract is 4 ticks Lower and trading at 4224.25.
Gold: The June'21 Gold contract is trading Up at 1837.00. Gold is 58 ticks Higher than its close.
Initial conclusion
This is not a correlated market. The dollar is Down- and Crude is Up+ which is 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 Lower and Crude is trading Higher 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. Asia is trading mainly Higher with the exception of the Shanghai and Hang Seng exchanges which are Lower at this time. Europe is trading Mixed with half the exchanges Higher and the other half Lower.
Possible challenges to traders today
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FOMC Member Evans Speaks at 2 PM EST. This is Major.
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Lack of Major Economic News.
Bias
On Friday we gave the markets a Neutral bias as it was Jobs Friday and we always maintain a Neutral bias on that day. Why? Because the markets have never shown any sense of normalcy on that day. Today we're not dealing with a correlated market and our bias is Neutral or Mixed.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Last Friday the all-important Non-Farm Payroll numbers were released that quite frankly came nowhere near to it's estimates. The number came in at 266,000 versus the 990,000 estimates, the Unemployment rate rose to 6.1% versus the 5.8% previous. As soon as this news came out the finger-pointing began. The GOP claimed that the stimulus package created an incentive to stay home and not work yet the economy has shed 8 million jobs since the pandemic began. My take on this is simple and I say this because although retired I still recall the times when I was unemployed. No one wants to be unemployed, why? Because these extensions of benefits are temporary in nature and do not last for the long time. In other words, it is finite with a pre-defined number of weeks and after that you have a big problem scrambling to find work. Why do I think this occurred? I think the recent surge in Covid 19 cases didn't help and I think that the true measure of the stimulus is yet to be felt. So time will tell how it all works out.
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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