This is not a correlated market. The dollar is Up, and Crude is Up which is not normal, and the 30-year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower, then the 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 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. Currently all of Asia is trading Lower. All of Europe is trading Lower as well.

Possible challenges to traders today

Mortgage Delinquencies - tentative. This is Major.
FOMC Member Bullard Speaks at 11 AM EST. This is Major.

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.

We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, 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.

On Friday the ZN made its move at around 11:30 AM EST. The ZN hit a Low around that time and the S&P moved Lower. If you look at the charts below ZN gave a signal at around 11:30 AM EST and the S&P moved Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 11:30 AM EST and the S&P was moving Lower shortly thereafter. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 30-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 50 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar '22. The S&P contract is now Mar '22 as well. I've changed the format to Renko bars such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN - Mar 2022 - 02/11/22

S&P - Mar 2022 - 02/11/22

Bias

On Friday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher, and this usually reflects a Downside Day. The Markets didn't disappoint as the Dow dropped 504 points and the other indices lost ground as well. Today we aren't dealing with a correlated market and our bias is to the Downside.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

When we looked at the markets early Friday AM as is our custom, we felt a continuation of Thursday's slide. However early in the trading session it appeared as though the markets wanted to migrate Higher, after 10 AM that changed. The markets dived Lower and remained in negative territory for the remainder of the session. News came out that suggested a Russian invasion of the Ukraine was imminent and may in fact happen prior to the conclusion of the Winter Olympics currently being held in China. The impact of such an event cannot be underestimated. Russia supplies most of Europe with well needed natural gas used for cooking and heating homes. Natural Gas is already trading Higher due to the Winter season, this invasion will drive it Higher even further. The political aspect of this shouldn't be overlooked either. Putin claims that he doesn't want a NATO nation right next door to Russia but if he overtakes the Ukraine, what is right next door? Poland, a NATO nation. So, the question is when will enough be enough? Only time will tell.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD weakens to near 1.1900 as traders eye US data

The EUR/USD pair loses ground to around 1.1905, snapping the two-day winning streak during the early European trading hours on Tuesday. Markets might turn cautious ahead of the release of key US economic data, including US employment and inflation reports that were pushed back slightly due to the recently ended four-day government shutdown.

GBP/USD edges lower below 1.3700 on UK political risks, BoE rate cut bets

The GBP/USD pair trades on a weaker note around 1.3685 during the European session on Tuesday. The Pound Sterling edges lower against the US Dollar amid political risk in the United Kingdom and rising expectations of near-term Bank of England rate cuts.

Gold drifts lower as positive risk tone tempers safe-haven demand; downside seems limited

Gold drifts lower during the Asian session on Tuesday and snaps a two-day winning streak, though it lacks strong follow-through selling and shows some resilience below the $5,000 psychological mark amid mixed cues. The outcome of Japan's snap election on Sunday removes political uncertainty, which, along with signs of easing tensions in the Middle East, remains supportive of the upbeat market mood.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.

Follow the money, what USD/JPY in Tokyo is really telling you

Over the past two Tokyo sessions, this has not been a rate story. Not even close. Interest rate differentials have been spectators, not drivers. What has moved USD/JPY in local hours has been flow and flow alone.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash (BCH) trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.