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

CPI is out at 8:30 AM EST. This is Major.
Core CPI is out at 8:30 AM EST. This is Major.
FOMC Member Clarida Speaks at 9 AM EST. This is Major.
Crude Oil Inventories are out at 10:30 AM EST. This is Major.
FOMC Member Bostic Speaks at 1 PM EST. This is Major.
10 Year Bond Auction Starts at 1 PM EST. This is Major.
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.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.