What goes down, must come up

USD: Sept '24 is Up at 101.565.

Energies: Oct '24 Crude is Down at 68.00.

Financials: The Dec '24 30 Year T-Bond is Down 12 ticks and trading at 125.25.

Indices: The Sept '24 S&P 500 emini ES contract is 12 ticks Lower and trading at 5477.00.

Gold: The Dec'24 Gold contract is trading Up at 2533.90.

Initial conclusion

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. Currently Asia is trading Mixed.  All of Europe is trading Mixed as well.

Possible challenges to traders

• NFIB Small Business Index is out at 6 AM EST.  This is Major.

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

• FOMC Member Bowman Speaks at 12:15 PM.  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 migrated Higher at around 8 AM EST with no real economic news to speak of and began its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8 AM 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 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 still Sept '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 - 09/09/24

Dow - Sept 2024- 09/09/24

Bias

Yesterday we gave the markets an Upside bias as the indices were Up and the Bonds were down which represented an Upside bias.  The markets didn't disappoint as the Dow gained 484 points on the session and the other indices showed gains 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 they say that "what goes up must come down" so conversely "what goes down must come up."  Such was the case yesterday as the markets wanted to regain some of what was lost Friday.  This plays into the notion of one day up, next down and vice versa and yes that may work for a while, until it doesn't work.  We gave the markets an Upward bias because we saw the bonds down and the indices up.  As such we always give a reason for our suggestions.  Today the only real economic news is two FOMC members speaking.  What they will say we cannot know for certain but we will always give a reason for our predictions.  Are they right 100% of the time?  Nothing is right 100% of the time and should you hear that, best to put on your track shoes and run.