Nick Mastrandrea
Market Tea Leaves
US Dollar: Jun '21 USD is Up at 90.260.
Energies: Jun'21 Crude is Up at 65.78.
Financials: The June '21 30 year bond is Up 7 ticks and trading at 157.05.
Indices: The June'21 S&P 500 emini ES contract is 37 ticks Lower and trading at 4137.25.
Gold: The June'21 Gold contract is trading Down at 1833.70. Gold is 24 ticks Lower than its close.
Initial conclusion
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 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. Asia is trading Mixed at this time with half the exchanges Higher and the other half Lower. Europe is trading Mixed as well.
Possible challenges to traders today
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CPI is out at 8:30 AM EST. This is Major.
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Core CPI is out at 8:30 AM EST. This is Major.
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FOMC Member Clarida Speaks at 9 AM EST. This is Major.
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Crude Oil Inventories are out at 10:30 AM EST. This is Major.
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FOMC Member Bostic Speaks at 1 PM EST. This is Major.
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10 Year Bond Auction Starts at 1 PM EST. This is Major.
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Federal Budget Balance is out at 2 PM EST. This is Major.
Bias
Yesterday we gave the markets a Neutral bias as we saw no correlation yesterday morning. All instruments were pointed Lower and whenever you have a situation where all instruments are Lower or Conversely all instruments are Higher, there is no correlation. Hence the Neutral bias. The Dow closed Lower by 474 points and the other indices closed Lower as well. 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
Yesterday when we first viewed the markets we knew it wouldn't be an ordinary day as all the instruments we use for Market Correlation purposes were pointed Lower. Could it be the cyberattack on the Colonial Pipeline? Probably but ironically enough crude oil was relatively stable yesterday pricewise. Sometimes the markets move with the expectation that something will happen, even if it doesn't. This is liken to the adage "buy the rumor, sell the news." Of course we'll know better today after Crude Oil inventories are released. In other news the Jolts Jobs openings cam in at 8.12 million versus 7.50 million expected.
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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