As long as inflation is high and interest rates are higher, no one is going to feel more prosperous

USD: Sept '24 is Up at 104.625.

Energies: Aug '24 Crude is Down at 82.40.

Financials: The Sept '24 30 Year T-Bond is Down 14 ticks and trading at 118.12

Indices: The Sept '24 S&P 500 emini ES contract is 2 ticks Higher and trading at 5622.00.

Gold: The Aug'24 Gold contract is trading Down at 2381.80.  

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is normal, and 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 Higher and Crude is trading Lower 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.  All of Asia is trading Lower except the Aussie exchange. Currently all of Europe is trading Higher. 

Possible challenges to traders

• Consumer Credit m/m is out at 3 PM EST. This is Major.

• Lack of Major economic news.

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 10-year Treasury notes (ZN) 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.  

On Friday the ZT migrated Higher at around 8:30 AM EST after the job numbers were released.  If you look at the charts below the ZT gave a signal at around 8:30 AM and started its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM and the ZT moved Higher at around the same time.  These charts represent the newest version of BarCharts 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 30 ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is Sept and the Dow is now 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 -Sept 2024 - 07/05/24

Dow - Sept 2024 - 07/05/24

Bias

On Friday we gave the markets a Mixed or Neutral bias as it was Jobs Friday.  The markets migrated to the Upside, although not by much.  The Dow gained 68 points on the session 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

This year much talk has been made on this thing called "Bidenomics" which isn't economics but a strategy to promote job growth.  Yet no one acknowledges it as having any real impact on anything related to economics. Ronald Reagan had the most horrible idea on stimulating the economy.  Give tax breaks to the wealthy and this will magically trickle down to the average guy or gal. Problem is when wealthy get anything they are loath to give it to anyone and the jobs they create usually isn't a living wage job.  Yet people applauded Reagan in 1984 and re-elected him. Why?  People felt prosperous, not because of what Reagan told anyone but because the ultimate consumer had more buying power.  Interest rates were coming down and inflation was more under control than the previous administration. This is what the Biden camp isn't getting.   As long as inflation is high and interest rates are Higher, no one is going to feel more prosperous and with higher interest rates, forget about buying power. It doesn't matter if you have a job, if you aren't keeping pace with rising prices, you're never going to feel prosperity. Somehow Joe and company have to convince the Federal Reserve to start lowering rates, cause without that Bidenomics, Reaganomics, whatevernomics isn't going to work.