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 bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher 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.

At this hour Asia is trading mainly Lower with the exception of the Shanghai and Singapore exchanges which are fractionally Higher. Currently all of Europe is trading Higher with the exception of the London exchange which is fractionally Lower.

Possible Challenges To Traders Today

CPI is out at 8:30 AM EST. This is major.
Core CPI is out at 8:30 AM EST. This is major.
Crude Oil Inventories is out at 10:30 AM EST. This is major.
FOMC Member Quarles Speaks at 11:50 AM EST. This is major.
10-y Bond Auction starts at 1 PM EST. Major
FOMC Meeting Minutes are released at 2 PM EST. This is major.
Federal Budget Balance is out at 2 PM EST. Major.

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) and The YM futures contract. The YM contract is the DJIA 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 ZB made a major move at around 8 AM EST. The ZB hit a Low at around that time and the YM hit a High. If you look at the charts below ZB gave a signal at around 8 AM EST and the YM was moving Lower at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 8 AM and the YM was moving Lower at the same time. 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 30 year bond, as a trader you could have netted about 20 ticks per contract on this trade. Each tick is worth $31.25. Please note: the front month for the ZB contract is now June, 2019

Charts Courtesy of MultiCharts built on an AMP platform.

Bias

Yesterday we gave the markets a Neutral bias as the indices didn't seem to have any sense of direction yesterday morning. The Dow dropped 190 points and the other indices lost ground 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 both the Asian and European markets were trading Lower and it became apparent that yesterday would be a challenging day. It didn't help when President Trump decided to issue a tweet warning potential tariffs of European goods. Doing this to China and Asia in general is one thing. The Chinese aren't thought of as high quality. Europe however is high quality. Does BMW, Mercedes Benz and LVMH ring a bell? When will this Chief Administrator learn that every vowel will be dissected? It's been two years already. So the market hears this and guess what? They run for cover.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD holds firm near 1.1850 amid USD weakness

EUR/USD remains strongly bid around 1.1850 in European trading on Monday. The USD/JPY slide-led broad US Dollar weakness helps the pair build on Friday's recovery ahead of the Eurozone Sentix Investor Confidence data for February.

GBP/USD hovers near 1.3600 as UK government crisis weighs on Pound Sterling

GBP/USD moves sideways after registering modest gains in the previous session, trading around 1.3610 during the European hours on Monday. The pair could come under pressure as the Pound Sterling may weaken amid a fresh government crisis in the United Kingdom.

Gold remains supported by China's buying and USD weakness as traders eye US data

Gold struggles to capitalize on its intraday move up and remains below the $5,100 mark heading into the European session amid mixed cues. Data released over the weekend showed that the People's Bank of China extended its buying spree for a 15th month in January. Moreover, dovish US Fed expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.

Cardano steadies as whale selling caps recovery

Cardano (ADA) steadies at $0.27 at the time of writing on Monday after slipping more than 5% in the previous week. On-chain data indicate a bearish trend, with certain whales offloading ADA. However, the technical outlook suggests bearish momentum is weakening, raising the possibility of a short-term relief rebound if buying interest picks up.

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.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Bitcoin, Ethereum, and Ripple prices consolidated on Monday after correcting by nearly 9%, 8%, and 10% in the previous week, respectively. BTC is hovering around $70,000, while ETH and XRP are facing rejection at key levels. Traders should be cautious: despite recent stabilization, upside recovery for these top three cryptocurrencies is capped as the broader trend remains bearish.