This is not a correlated market. The dollar is Up, and Crude is Down which is 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 the bonds should follow and vice-versa. The S&P is Lower, and Crude is trading Lower which is not correlated. Gold is trading Lower which is 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. Asia is trading mainly Lower with the exception of the Shanghai and Sensex exchanges which are trading Higher. Currently all of Europe is trading Higher.

Possible challenges to traders today

Building Permits is out at 8:30 AM EST. Major.
Housing Starts is out at 8:30 AM EST. Major.
Capacity Utilization Rate is out at 9:15 AM EST. Major.
Industrial Production is out at 9:15 AM EST. 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.

Yesterday the ZN made its move at around 8 AM EST. The ZN hit a Low at around that time and the S&P moved Lower shortly thereafter. If you look at the charts below ZN gave a signal at around 8 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 8 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 15-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 20 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Sep '22. The S&P contract is also Sep' 22 as well. The front months are now Sep' 22. 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 - Sep 2022 - 08/15/22

S&P - Sep 2022 - 08/15/22

Bias

Yesterday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher Monday morning and that usually reflects a downside day. The markets had other ideas as the Dow gained 151 points and the other indices traded Higher 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 morning we arise and see that the markets are indeed correlated to the Downside and as such we gave the markets a Downside bias. Economic news is released that is NOT stellar. Empire State Manufacturing Index comes in at minus 31.3. Yes, I said minus. NAHB Housing Market Index comes in at 49 versus 55 expected. These are not good numbers, yet the markets rise. There can only be one explanation for this. The institutionals aka the Smart Money decided to go long the markets and prop it up. Think this is far-fetched? During the dark days of 2009 there was a phenomenon called teh Plunge Protection Team otherwise known as PPT. Every day at a certain time of the day you would the markets edge up based on nothing at all and the only entity that could do that are the Smart Money as they have billions to buy and sell with. When they make trades, they don't buy a handful of contracts, they buy and sell thousands at a clip because they have the capital to do so. Do they do this all the time? I don't think so as in recent years they didn't have to. The markets behaved exactly as they wanted it to but when we see things liken to yesterday, it makes you wonder.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD off highs, back to around 1.1900

EUR/USD keeps its strong bid bias in place despite recedeing to the 1.1900 zone following earlier peaks north of 1.1900 the figure on Monday. The US Dollar remains under pressure, as traders stay on the sidelines ahead of Wednesday’s key January jobs report, leaving the pair room to extend its upward trend for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold picks up pace, retargets $5,100

Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.