Dow at all time high

USD: Dec '24 is Down at 103.295.

Energies: Nov '24 Crude is Up at 70.03.

Financials: The Dec '24 30 Year T-Bond is Down 9 ticks and trading at 121.02.

Indices: The Dec '24 S&P 500 emini ES contract is 100 ticks Higher and trading at 5912.00.

Gold: The Dec'24 Gold contract is trading Up at 2703.70.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is 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 Higher which is correlated with the US dollar trading Down.  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 traded Lower with the exception of the Aussie and Singapore exchanges.  All of Europe is trading Higher. 

Possible challenges to traders

• Core Retail Sales m/m is out at 8:30 AM EST. This is Major.

• Retails Sales is out at 8:30 AM EST. This is Major.

• Unemployment Claims are out at 8:30 AM EST. This is Major.

• Philly Fed Manufacturing Index is out at 8:30 AM This is Major.

• Capacity Utilization Rate is out at 9:15 AM EST. This is Major.

• Industrial Production m/m is out at 9:15 AM EST. This is Major.

• Business Inventories m/m is out at 10 AM EST.  This is Major.

• NAHB Housing Market Index is out at 10 AM EST. This is Major.

• Natural Gas Storage is out at 10:30 AM EST. This is Major.

• Crude Oil Inventories is out at 11 AM EST. This is Major.

• FOMC Member Goolsbee Speaks at 11 AM EST. This is Major.

• Federal Budget Balance is tentative. This is Major.

• TIC Long-Term Purchases is out at 4 PM EST. This is not 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 Lower at around 8:30 AM EST as no real economic news loomed and began its Downward Slide. Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:30 AM and the ZT moved Lower 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 Short 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 now Dec '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 - 10/16/24

Dow - Dec 2024- 10/16/24

Bias

Yesterday we gave the markets a Mixed or Neutral bias as we saw no evidence of market correlation Wednesday morning and the market veered to the Upside with the Dow gaining 337 points and the other indices closed Higher as well. Today we aren't dealing with a correlated market, and our bias is to the Upside.

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

Commentary

Yesterday we gave the markets a Neutral bias as we saw no evidence of market correlation Wednesday morning. Import Prices came in Lower than expected and the markets viewed that news as positive and the markets reacted favorably. The Dow hit an all time High.