Stimulus approved – Markets roar [Video]

US Dollar: Dec '20 USD Down at 89.955.

Energies: Jan'21 Crude is Up at 48.23.

Financials: The Mar '21 30 year bond is Down 11 ticks and trading at 172.13.

Indices: The Dec S&P 500 emini ES contract is 67 ticks Higher and trading at 3744.25. 

Gold: The Feb'21 Gold contract is trading Up at 1884.00  Gold is 36 ticks Higher than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Down- and Crude is Up+ which is 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 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 is trading Higher at this time with the exception of the Hang Seng and Singapore exchanges.  All of Europe is trading Higher.

Possible Challenges To Traders Today

• S&P/CS Composite-20 HPI y/y is out at 9 AM EST.  This is Major.

• Lack of Major economic news.

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 liken to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZN made it's move at around 7:30 AM EST.  The ZN hit a Low at around that time and the S&P moved Lower.  If you look at the charts below ZN gave a signal at around 7:30 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 7:30 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 15 minute chart to display better.  This represented a Long opportunity on the 10 year note, as a trader you could have netted about 15 ticks per contract on this trade.   Each tick is worth $15.625.  Please note: the front month for the ZN is now Mar '21.  The S&P contract is now March '21.  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 2021 - 12/28/20

S&P - Mar 2021 - 12/28/20

Bias

Yesterday we gave the markets an Upside bias as both the USD and the Bonds were trading Lower Monday morning and this is usually indicative of an Upside day.  The markets didn't disappoint as the Dow closed Higher by 204 points and the other indices traded Higher 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

Well late Sunday evening President Trump finally approved the Covid Relief Package which helped avert a government shutdown and provided additional relief to the unemployed.  The markets reacted positively to this news as the indices closed Higher with the Dow in positive triple digit territory.  Will the markets remain in positive territory by year end which is only 3 more trading sessions?  We certainly hope so but as in all things, only time will tell.