Nick Mastrandrea
Market Tea Leaves
US Dollar: Jun '21 USD is Up at 90.185.
Energies: Jun'21 Crude is Up at 70.00.
Financials: The Sept '21 30 year bond is Down 6 ticks and trading at 158.19.
Indices: The Jun'21 S&P 500 emini ES contract is 6 ticks Higher and trading at 4220.00.
Gold: The Aug'21 Gold contract is trading Down at 1885.20. Gold is 104 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 but 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 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. All of Asia is trading Higher with the exception of the Hang Seng exchange. Currently, all of Europe is trading Lower with the exception of the London exchange which is fractionally Higher at this time.
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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Unemployment Claims are out at 8:30 AM EST. This is Major.
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Natural Gas Storage is out at 10:30 AM EST. This is Major.
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30-y Bond Auction is out 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 once again but instead of trading Mixed the markets firmly traded to the Downside. The Dow dropped 153 points and the other indices lost ground as well. Today we aren't dealing with a correlated market and our bias is to the Upside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Once again we saw no correlation in the markets yesterday morning and as such felt compelled to give a Neutral or Mixed bias. The markets traded firmly to the downside yesterday and the good news here is that we witnessed unilateral direction in which we haven't for some days now. Today we weekly Unemployment Claims which is Major but we also have CPI and Core CPI numbers out at 8:30 AM EST. These are proven market movers and can change the market direction.
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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