This is not a correlated market. The USD is Up and Crude is Down which is normal, but 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 Lower and Crude is trading Lower 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. All of Asia traded Higher. All of Europe is trading Higher as well.

Possible challenges to traders

Empire State Manufacturing Index is out at 8:30 AM EST. This is Major.
Import Prices m/m is out at 8:30 AM 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 8:25 AM EST with no news to speak of. The Dow sunk Lower at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:25 AM EST and the ZT moved 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 20 ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for ZT is now Jun '25 and the Dow is Jun '25 as well. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

ZT -Jun 2025 - 4/14/25

Dow - Mar 2025- 4/14/25

Bias

Yesterday we gave the markets an Upside bias and the markets didn't disappoint as the USD and Gold traded Lower Monday morning. The Dow gained 312 points on the session and the other indices closed Higher as well. Today we aren't dealing with a correlated market and our bias is Mixed or Neutral.

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

Commentary

So yesterday the markets continued its upward trend as it was announced that the USA will be selective on the products that it will tariff from China. In particular any electronic product such as iPhone, laptops, computers etc. The markets reacted favorably to this and drove the markets Higher. Will we see a third day of upward movement? Only time will tell. Want to learn Market Correlation and determine market direction hours before the Opening Bell?

Author

Nick Mastrandrea

Market Tea Leaves

Markets move fast. We move first.

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