Nick Mastrandrea
Market Tea Leaves
US Dollar: Jun '21 USD is Up at 91.315.
Energies: Jun'21 Crude is Up at 66.45.
Financials: The June '21 30 year bond is Down 7 ticks and trading at 157.25.
Indices: The June'21 S&P 500 emini ES contract is 60 ticks Higher and trading at 4173.25.
Gold: The June'21 Gold contract is trading Up at 1778.90. Gold is 29 ticks Higher 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 Lower. 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 not 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. Conversely all of Europe is trading Higher.
Possible challenges to traders today
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ADP Non-Farm Employment Change is out at 8:15 AM EST. This is Major.
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FOMC Member Evans Speaks at 9:30 AM EST. This is Major.
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Final Services PMI is out at 9:45 AM EST. This is Major.
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ISM Services PMI is out at 10 AM EST. This is Major.
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Crude Oil Inventories is out at 10:30 AM EST. This is Major.
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FOMC Member Evans Speaks at 3 PM EST. This is Major.
Bias
Yesterday we gave the markets a Neutral or Mixed bias as we saw no real evidence of Market Correlation. The markets closed Mixed as the Dow traded Higher by about 20 points but the S&P and Nasdaq both closed Lower. 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
A funny thing happened on the way to the markets yesterday. Janet Yellen our new Secretary of the Treasury made some comments to the effect that in the future the Federal Reserve will have to raise interest rates to calm an overheated economy. I personally think her comments were taken out of context. The Fed will hike rates when feel it is appropriate to do so and that time is not now. But as always the markets hears one thing and ignores the rest. If the economy was booming and growing at 5% a year or better then the Fed may feel obligated to hike if only to keep inflation at bay. But the Fed has already stated that they didn't any hikes in the horizon until late 2022 or early 2023. Again that time is not now and if the economy is roaring by that time and as of now we do not know that.
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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