This is not a correlated market. The dollar is Down, and Crude is Up which is normal, but the 30-year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower, then the 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 not correlated with the US dollar trading Down. 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 with half the exchanges Higher and the other half Lower. Currently all of Europe is trading Higher.

Possible challenges to traders today

Prelim GDP is out at 8:30 AM EST. This is Major.
Prelim GDP Price Index out at 8:30 AM EST. This is Major.
Unemployment Claims are out at 8:30 AM EST. This is Major.
Pending Home Sales is out at 10 AM EST. This is Major.
Natural Gas Storage is out at 10:30 AM EST. This is Major.

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.

We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, and the purpose is to show reverse correlation between the two instruments. Remember it's likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZN made its move at around 11:40 AM EST. The ZN hit a High at around that time and the S&P moved Higher shortly thereafter. If you look at the charts below ZN gave a signal at around 11:40 AM EST and the S&P moved Higher at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a High at around 11:40 AM EST and the S&P was moving Higher shortly thereafter. 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 Shorting opportunity on the 10-year note, as a trader you could have netted about a dozen ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '22. The S&P contract is also Jun' 22 as well. I've changed the format to Heikin-Ashi such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN - Jun 2022 - 05/25/22

S&P - Jun 2022 - 05/25/22

Bias

Yesterday we gave the markets a Neutral bias as we saw little evidence of Market Correlation Wednesday morning. The markets veered to the Upside and the Dow closed Higher by 192 points and the other indices closed Higher 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

Liken to what we saw Tuesday the markets decided to continue on the forward path and go Higher even though none of the economic news reported exceeded or met expectation. This was a case of the dead cat bounce as the markets had sold off dramatically and sooner or later short covering comes into play. Today we have preliminary GDP, Unemployment Claims and Pending Home Sales; all of which are major and proven market movers. Will these reports help to move the markets Higher? Only time will tell.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD climbs to daily highs near 1.1820

EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.

GBP/USD trims losses, retests 1.3460

After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.

Gold flirts with four-week highs past $5,200

Gold extends its rebound, climbing for a third consecutive session and pushing back above the $5,200 mark per troy ounce on Friday. The move higher continues to draw support from lingering geopolitical tensions and the ongoing uncertainty surrounding US trade policy, both of which are keeping safe-haven demand firmly in play.

Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias

Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.