Rate cut expectation fuels markets

USD: Dec '25 is Down at 98.755.  

Energies: Jan '26 Crude is Up at 59.32.

Financials: The Mar '26 30 Year T-Bond is Lower by 11 ticks and trading at 116.11.

Indices: The Dec '25 S&P 500 emini ES contract is 36 ticks Higher and trading at 6868.00.

Gold: The Feb'26 Gold contract is trading Up at 4229.50.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, and 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 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 traded Mixed.   Currently all of Europe is trading Higher.

Possible challenges to traders                                              

• Challenger Job Cuts y/y is outat 7:30 AM EST. Major. 
• Unemployment Claims is out at 8:30 AM EST.  Major.
• Natural Gas Storage is out at 10:30 AM EST. Major.  
• FOMC Member Bowman Speaks at 12 noon EST. 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 dived Lower at around 8:30 AM EST with no news pending.   The Dow climbed Higher at around the same time.  Look at the charts below and you'll see a pattern for both assets. The ZT dived Lower at around 8:30 AM EST and the Dow climbed Higher 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 Short opportunity on the 2-year note, as a trader you could have netted about 20 plus ticks per contract on this trade.  Each tick is worth $6.25.  Please note: the front month for ZT is now Mar '26 and the Dow is now 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 

ZT -Dec 25 - 12/03/25

Dow - Dec 2025- 12/03/25

Bias

Yesterday we gave the markets a Mixed bias but the markets veered to the Upside.  The Dow gained 408 points, and the other indices gained ground 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 gave the markets a neutral or Mixed bias and ironically up until the last half hour of trade the markets were Mixed.  However, before the Closing Bell rang the markets migrated to positive territory.  Much of this was fueled on speculation that the Fed will reduce rates next week when they meet.    Want to learn Market Correlation and determine market direction hours before the Opening Bell?