The markets strike back

USD: Sept '25 is Down at 97.970.  

Energies: Aug '25 Crude is Up at 65.03.

Financials: The Sep '25 30 Year T-Bond is Lower by 3 ticks and trading at 115.15.

Indices: The Sep '25 S&P 500 emini ES contract is 176 ticks Higher and trading at 6415.00.

Gold: The Aug'25 Gold contract is trading Up at 3445.90.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, and the 30 Year T-Bond is trading Lower.  The Financials should always correlate with the US dollar such that if the dollar is Higher, 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 Higher which is 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 traded Higher with the exception of the Aussie exchange.  Currently Europe is trading Higher except the London exchange.

Possible challenges to traders

• Unemployment Claims is out at 8:30 AM EST. This is Major.

• Prelim Nonfarm Productivity q/q is out at 8:30 AM EST. This is Major.

• Prelim Unit Labor Costs q/q is out at 8:30 AM EST. This is Major.

• Final Wholesale Inventories m/m is out at 10 AM EST. This is Major.

• FOMC Member Bostic Speaks at 10 AM EST. This is Major.

• Natural Fas Storage is out at 10:30 AM EST. This is Major.

• 30 Year Bond Auction Starts at 1 PM EST. This is Major.

• Consumer Credit is out at 3 PM EST. This is Major.

Traders, please note that we've changed the Bond instrument from the 10 Year (ZN) to the 2 Year (ZT).  They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract.  The YM contract is the Dow Jones Industrial Average, 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 ZT climbed Higher at around 9 AM EST with no real economic news pending.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow dived Lower at around 9 AM EST and the ZT climbed Higher at around the same time.  These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better.  This represented a Long opportunity on the 2-year note, as a trader you could have netted about a dozen ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Sep '25 and the Dow is now Sep '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

ZT -Sep 25 - 8/06/25

Dow - Sep 2025- 8/06/25

Bias

Yesterday we gave the markets an Upside bias and the markets didn't disappoint.  The Dow gained 74 points on the session and the other indices gained ground as well.  Today we are dealing with a nearly correlated market, and our bias is to the Upside.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

It seems as though the markets are entering a phase whereby one day up, next day down and vice versa.  This can work until it doesn't work, which is why each day we analyze the markets to determine market direction.  We leave nothing to chance.   Want to learn Market Correlation and determine market direction hours before the Opening Bell?