USD: Mar '25 is Up at 109.865.

Energies: Feb '25 Crude is Up at 77.04.

Financials: The Mar '25 30 Year T-Bond is Down 1 tick and trading at 111.06.

Indices: The Mar '25 S&P 500 emini ES contract is 190 ticks Lower and trading at 5918.00.

Gold: The Feb'25 Gold contract is trading Down at 2702.30.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not normal, and the 30 Year T-Bond is trading fractionally 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 Lower and Crude is trading Higher which is 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. All of Asia traded Lower.  Europe is trading Lower as well. 

Possible challenges to traders

  • Federal Budget Balance is out at 2 PM EST.  This is Major.

  • Lack of Major Economic News

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.

Last Friday the ZT migrated Lower at around 8:30 AM EST as Non-Farm Payrolls were released.  The Dow moved Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:30 AM EST and the ZT moved Lower 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 20 plus ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is now Mar '25 and the Dow is now Mar '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT

ZT -Mar 2025 - 1/10/25

Dow

Dow - Mar 2025- 1/10/25

Bias

On Friday we gave the markets a Neutral or Mixed bias as it was Jobs Friday, and we always maintain a Neutral bias on that day. The Dow dropped by 697 points and the other indices dove Lower as well.  The S&P was down by 91 points and the Nasdaq by 317.  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

On Friday the Job numbers came out showing a gain of 256,000 new jobs created versus an expectation of 164,000.  So, one might add what happened?  A stellar job report and triple digit losses on the Dow and Nasdaq? The issue is traders are concerned that the Federal Reserve will raise interest rates in light of such a stellar report. The hotter the economy becomes the more likelihood there is of a rate hike, which is something no one wants.  It means the access to capital will become harder and eventually Consumer Spending will take a hit and that means cars, housing, any high price item. Today we only have the Federal Budget Balance out at 2 PM EST. Will this right size the market?  Only time will tell.

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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