Will Richmond Manufacturing Index and the Beige Book be enough to turn the markets positive?

USD: Jun '24 is Up at 104.755.

Energies: Jul '24 Crude is Up at 80.41.

Financials: The June '24 30 Year T-Bond is Down 14 ticks and trading at 115.11.

Indices: The Jun '24 S&P 500 emini ES contract is 144 ticks Lower and trading at 5288.75.

Gold: The Jun'24 Gold contract is trading Down at 2344.90.  

Initial conclusion

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 Down.  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 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.  Asia is trading Lower with the exception of the Shanghai exchange.  All of Europe is trading Lower. 

Possible challenges to traders

• Richmond Manufacturing Index is out at 10 AM EST. This is Major.

• FOMC Member Williams Speaks at 1:45 PM EST. This is Major.

• Beige Book is out at 2 PM EST. This is Major.

• FOMC Member Bostic Speaks at 7 PM EST. This is not Major.

Treasuries

Traders, please note that we've changed the Bond instrument from the 2 year (ZT) 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 Treasury notes (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 migrated Lower at around 10 AM EST as the S&P hit a Low at around that time and the ZN migrated Lower.  If you look at the charts below the ZN gave a signal at around 10 AM and started its Upward climb.  Look at the charts below and you'll see a pattern for both assets. S&P moved Higher at around 10 AM and the ZN moved Lower at around the same time.  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 Short opportunity on the 10-year note, as a trader you could have netted about a dozen plus ticks per contract on this trade.   Each tick is worth $15.625.  Please note: the front month for both the ZN and the S&P are now Jun '24.  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 2024 - 05/28/24

S&P - Jun 2024 - 05/28/24

Bias

Yesterday we gave the markets a Mixed or Neutral bias, and the markets didn't disappoint. The Dow closed Lower by 217 points, but the S&P and Nasdaq both traded Higher.  Today we aren't dealing with a correlated market and our bias is to the Downside.

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

Commentary

Usually after a 3-day holiday weekend we generally see a pent-up demand in market activity.  That wasn't really the case yesterday as the Dow fell by 217 points.  Readers of this newsletter knew that the markets would trade in a Mixed or Neutral manner yesterday.  Today we have Richmond Manufacturing Index and the Beige Book out at 2 PM this afternoon.  Will this be enough to turn the markets positive?  We shall soon see.