Dow up again

04/12/2023 11:58:04 GMT|ByNick Mastrandrea

US Dollar: Jun '23 USD is Down at 101.730.

Energies: May '23 Crude is Up at 81.62.

Financials: The Jun '23 30-Year T-Bond is Down 8 ticks and trading at 132.04.

Indices: The Jun '23 S&P 500 Emini ES contract is 40 ticks Higher and trading at 4144.00.

Gold: The Apr'23 Gold contract is trading Up at 2024.50. Gold is 54 ticks Higher than its close.

Initial conclusion

This is a nearly 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. At the present time Asia is trading Higher with the exception of the Hang Seng and Singapore exchanges which are Lower. All of Europe is trading Higher. .

Possible challenges to traders today

CPI m/m is out at 8:30 AM EST. This is Major.
CPI y/y is out at 8:30 AM EST. This is Major.
Core CPI m/m is out at 8:30 AM EST. This is Major.
Crude Oil Inventories is out at 10:30 AM EST. This is Major.
10-y Bond Auction starts at 1 PM EST. Major.
FOMC Meeting Minutes is out at 2 PM EST. This is Major.
Federal Budget Balance is out at 2 PM 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 Lower at around 8:50 AM EST but at the same time the S&P hit a Low. If you look at the charts below the ZN gave a signal at around 8:50 AM and the ZN continued its Downward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a Low at around 8:50 AM and migrated Higher. 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 30 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '23. The S&P contract is also Jun' 23. 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 2023 - 4/11/23

S&P - Jun 2023 - 4/11/23

Bias

Yesterday we gave the markets an Upside bias as the indices was correlated that way. The Dow veered to the Upside but the other indices did not. The S&P was in positive territory for most of the session but in the final minutes drifted Lower. The Dow closed Higher by 98 points, the S&P dropped by 1 point and the Nasdaq was Lower by 52. Today we are dealing with a nearly correlated market and our bias is to the Upside.

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

Commentary

So yesterday was the first real trading day if you omit Easter Monday as a holiday. The Dow traded Higher by 98 points and I think this was the fourth or fifth session with the Dow trading Higher. We suggested an Upside Day as the USD and Crude were both trading Lower and that usually reflects an Upside Day. It was mainly an Upside Day as the Dow closed Higher and the S&P was off by one point. The Nasdaq dropped 52 points. We didn't have much ion the way of economic news yesterday, that changes today as we have all flavors of CPI being reported as well as Crude Oil inventories and the FOMC Meeting Minutes which may reveal what is in the Fed's mind the next time they meet. Will this correlate the markets to the Upside? As in all things, only time will tell.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

{{Text}}

Analysis