This is not a correlated market. The USD is Down, Crude is Up which is normal, but the 30 Year T-Bond is trading Higher. 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 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. At the present time Asia is trading mainly Higher with the exception of the Hang Seng and Indian Singapore exchanges which are trading Lower. All of Europe is trading Lower at the present time.

Possible challenges to traders today

Core PCE Price Index m/m is out at 8:30 AM EST. This is Major.
Core Durable Goods Orders m/m is out at 8:30 AM EST. This is Major.
Durable Goods Orders m/m are out at 8:30 AM EST. This is Major.
Goods Trade Balance is out at 8:30 AM EST. This is Major.
Personal Income m/m is out at 8:30 AM EST. This is Major.
Personal Spending m/m is out at 8:30 AM EST. This is Major.
Prelim Wholesale Inventories m/m is out at 8:30 AM. This is Major.
Revised UoM Consumer Sentiment is out at 10 AM EST. This is Not Major.
Revised UoM Inflation Expectations is out at 10 AM EST. This is not 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 migrated Lower at around 10:15 PM EST as the S&P hit a Low at around the same time. If you look at the charts below the ZN gave a signal at around 10:15 PM and the ZN continued its Downward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a Low at around 10:15 PM and migrated Higher. 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 Short opportunity on the 10-year note, as a trader you could have netted about 20 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '23. The S&P contract is also Jun' 23. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN - Jun 2023 - 5/25/23

S&P - Jun 2023 - 5/25/23

Bias

Yesterday we gave the markets an Upside bias as both the USD and the Bonds were trading Lower and that usually reflects an Up day. The markets traded Mixed as the Dow dropped 35 points but the other indices did trade to the Upside. Today we aren't 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

Still no resolution on the Debt Ceiling even though both Biden and McCartney have said that they're getting closer to an agreement. However there still is no agreement and we are less than a week away from June 1st when according to Secretary Yellen the US may default on its obligations and that is the first time in our history when something like that occurred. Today we have 9 economic reports, so we are saving it all before the Memorial Day weekend and on that note we wish all of you a safe and happy holiday. If you know of a veteran, give them thanks for their service. They have bought the peace that we enjoy.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD stays well offered below 1.1800

The selling pressure on EUR/USD is picking up pace, with the pair slipping decisively below the key 1.1800 level and sliding to fresh two week lows as Wednesday’s session draws to a close. The move lower comes as the US Dollar finds renewed strength after the latest round of US data and the release of the FOMC Minutes. Next of note on the docket will be the US weekly Initial Jobless Claims.

GBP/USD reaches multi-day lows near 1.3500

GBP/USD reverses its initial upside momentum and is now adding to previous declines, approaching the 1.3500 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold battle to regain $5,000 continues

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and challenging two-day highs near the $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Bitcoin has found or is near a bottom, extended consolidation to follow: K33

Bitcoin (BTC) is nearing or has already established a bottom, which could be followed by a sustained period of slow price movement, according to K33.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.