Will the Fed move quickly to cut rates?

USD: Jun '24 is Up at 105.630.

Energies: Jun '24 Crude is Up at 83.08.

Financials: The June '24 30 Year T-Bond is Down 6 ticks and trading at 114.13.

Indices: The Jun '24 S&P 500 emini ES contract is 10 ticks Lower and trading at 5144.50.

Gold: The Jun'24 Gold contract is trading Down at 2325.80  

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 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 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 Higher with the exception of the Shanghai and Sensex exchanges.  Currently Europe is trading Lower with the exception of the London exchange. 

Possible challenges to traders

• Employment Cost Index q/q 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 Major.

• HPI m/m is out at 9 AM EST.  This is Major.

• Chicago PMI is out at 9:45 AM EST.  This is Major.

• CB Consumer Confidence is out at 10 AM EST.  This is 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 migrated Higher at around 10:30 AM EST as the S&P hit a Low at around that time and the S&P hit a Hgh moving Lower.  If you look at the charts below the ZN gave a signal at around 10:30 AM and started its Upward climb.  Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 10:30 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 a dozen 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 - 04/29/24

S&P - Jun 2024 - 04/29/24

Bias

Yesterday we gave the markets an Upside bias as the markets looked to continue the upward momentum we saw on Friday.  The markets didn't disappoint as the Dow gained 146 points and the other indices gained ground as well.  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

Yesterday the markets continued its upward momentum as the Dow gained 146 points and the other indices gained ground as well.  I suppose that sometimes not having any economic news to report can an advantage and yesterday was no exception.  I think the markets are waiting with anticipation to see what the Federal Reserve may do on Wednesday as it is FOMC Day.  Personally, I don't think the Fed will move that quickly to cut rates, but everyone will want to hear what they say going forward as that unto itself could be enough to move the markets.  But as in all things, only time will tell.