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 trims gains, hovers around 1.1900 post-US data

EUR/USD trades slightly on the back foot around the 1.1900 region in a context dominated by the resurgence of some buying interest around the US Dollar on turnaround Tuesday. Looking at the US docket, Retail Sales disappointed expectations in December, while the ADP 4-Week Average came in at 6.5K.

GBP/USD comes under pressure near 1.3680

The better tone in the Greenback hurts the risk-linked complex on Tuesday, prompting GBP/USD to set aside two consecutive days of gains and trade slightly on the defensive below the 1.3700 mark. Investors, in the meantime, keep their attention on key UK data due later in the week.

Gold loses some traction, still above $5,000

Gold faces some selling pressure on Tuesday, surrendering part of its recent two-day advance although managing to keep the trade above the $5,000 mark per troy ounce. The daily pullback in the precious metal comes in response to the modest rebound in the US Dollar, while declining US Treasury yields across the curve seem to limit the downside.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash (BCH) trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.