Nick Mastrandrea
Market Tea Leaves
US Dollar: Jun '23 USD is Up at 102.075
Energies: May '23 Crude is Up at 74.61.
Financials: The Jun '23 30 Year T-Bond is Down 8 ticks and trading at 129.29.
Indices: The Jun '23 S&P 500 Emini ES contract is 24 ticks Higher and trading at 4086.00.
Gold: The Apr'23 Gold contract is trading Down at 1995.70. Gold is 20 ticks Lower than its close.
Initial conclusion
This is not a correlated market. The USD is Up, and Crude is Up which is not 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 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. At the present time Asia is trading Higher. Currently all of Europe is trading Higher as well. .
Possible challenges to traders today
-
Core PCE Price Index m/m is out at 8:30 AM EST. This is Major.
-
Personal Income m/m is out at 8:30 AM EST. This is Major.
-
Personal Spending m/m is out at 8:30 AM EST. This is Major.
-
Chicago PMI is out at 9:45 AM EST. This is Major.
-
Revised UoM Consumer Sentiment is out at 10 AM EST. This is not Major.
-
Revised UoM Inflation Expectations is out at 10 AM EST. This is not Major.
-
FOMC Member Williams Speaks at 3:05 PM EST. This is not Major FOMC
-
Member Cook Speaks at 5:45 PM EST. This is not Major.
-
FOMC Member Waller Speaks at 10 PM EST. This is not 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 hit a Low at around 8:45 AM EST but at the same time the S&P hit a High. If you look at the charts below the ZN gave a signal at around 8:45 AM and the ZN continued its Upward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 8:45 AM and migrated Lower. 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 Long opportunity on the 10-year note, as a trader you could have netted about 20 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '23. The S&P contract is also Jun' 23. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.
Charts courtesy of MultiCharts built on an AMP platform
ZN - Jun 2023 - 3/30/23
S&P - Jun 2023 - 3/30/23
Bias
Yesterday we gave the markets an Upside bias. Both the USD and the Bonds were trading Lower and that usually reflects an Upside Day. The markets didn't disappoint as the Dow traded Higher by 141 points and the other indices traded 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
Well, yesterday we gave the markets an Upside bias as the USD and Bonds were both trading Lower and this usually reflects an Upside Day. The markets didn't disappoint as the Dow traded 141 points Higher and the other indices traded Higher as well. Today we have Personal Income and Personal Spending, both of which are Major so perhaps the upward trend will continue.
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.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.