This is not a correlated market. The USD is Up and Crude is Up which is not 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 Higher which is 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 traded Higher with the Shanghai trading Lower. Europe is trading mainly Higher with the exception of the Spanish Ibex exchange.

Possible challenges to traders

Goods Trade Balance is out at 8:30 AM EST. This is Major.
Preliminary Wholesale Inventory m/m is out at 8:30 AM EST. This is Major.
S&P/CS Composite-20 HPI y/y is out at 9 AM EST. This is not Major.
HPI m/m is out at 9 AM EST. This is Major.
CB Consumer Confidence is out at 10 AM EST. This is Major.
Jolts Job Openings is out at 10 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 slide Lower at around 8:15 AM EST with no economic news to speak of. The Dow crept Higher at the same time and began its Upward climb. Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:15 AM and the ZT moved Lower at around the same time. These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 5-minute chart to display better. This represented a Short opportunity on the 2-year note, as a trader you could have netted about 30 plus ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is Dec and the Dow is now Dec '24. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of Barcharts

ZT -Dec 2024 - 10/28/24

Dow - Dec 2024- 10/28/24

Bias

We gave no bias yesterday as there was no edition on Monday, the 28th. The markets however rallied as the Dow crept Higher by 273 points and the other indices closed Higher as well. Today we aren't dealing with a correlated market, and our bias is Neutral or Mixed.

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

Commentary

So, Sunday night former President Trump holds a political rally at the fabled Madison Square Garden in New York City. As usual he wasn't much on divulging plans as to what he'll do if elected. His comic relief however made some disparaging comments about Puerto Rico describing it as an "island of garbage" in the middle of the Carribean Sea. The next day all the liberal news outlets were furious about this, but the odd thing was the markets rallied after the Trump rally at the Garden. The markets have this idea that if Trump does well then, the markets will do well, and I wonder where have they been the last few years? In fact, if you really look back the markets have done well with the Democrats in office. Want proof? Think back to the Clinton years in the 1990's and tell me the Internet and internet related stocks didn't advance the markets.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD turns negative near 1.1850

EUR/USD has given up its earlier intraday gains on Thursday and is now struggling to hold above the 1.1850 area. The US Dollar is finding renewed support from a pick-up in risk aversion, while fresh market chatter suggesting Russia could be considering a return to the US Dollar system is also lending the Greenback an extra boost.

GBP/USD change course, nears 1.3600

GBP/USD gives away its daily gains and recedes toward the low-1.3600s on Thursday. Indeed, Cable now struggles to regain some upside traction on the back of the sudden bout of buying interest in the Greenback. In the meantime, investors continue to assess a string of underwhelming UK data releases released earlier in the day.