Downside bias – Mixed market

USD: Sept '24 is Down at 101.135.

Energies: Oct '24 Crude is Up at 69.40.

Financials: The Dec '24 30 Year T-Bond is Down 3 ticks and trading at 125.03.

Indices: The Sept '24 S&P 500 emini ES contract is 12 ticks Higher and trading at 5533.00.

Gold: The Dec'24 Gold contract is trading Up at 2545.30.

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. Currently  Asia is trading Mixed.  All of Europe is trading Mixed as well.

Possible challenges to traders

• Challenger Job Cuts y/y is out at 7:30 AM EST.  This is Major.

• ADP Non-Farm Employment Change is out at 8:15 AM EST.  This is Major.

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

• Revised Nonfarm Productivity q/q is out at 8:30 AM EST.  This is not Major.

• Revised Unit Labor Costs q/q is out at 8:30 AM EST.  This is not Major.

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

• ISM Services PMI 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.

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 with no real news in sight 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 BarCharts, 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 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 still 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 -Dec 2024 - 09/04/24

Dow - Sept 2024- 09/04/24

Bias

Yesterday we gave the markets a Downside bias as both the Bonds and Crude were Higher Wednesday morning and that usually represents a Down Day.  The markets traded mainly Lower as both the S&P and Nasdaq closed Lower while the Dow gained 38 points on the session.  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

Yesterday we gave the markets a Downside bias as both the Bonds and Crude were trading Higher and for the most part we were correct.  The only holdout being the Dow with a gain of 38 points.  Much speculation has been made regarding Kamala Harris's plan to tax unearned assets.  This is driving much doubt as no one knows how this will work in the real world.  Ordinarily no asset is taxed until the sale of that asset is made and all parties know exactly how much was made and what the profit (is any ) was accrued.  Taxing something before a sale made is high speculative as what is the value of that asset changes yet it wasn't sold yet so the owner of that asset hasn't realized any profit as yet.  More thought needs to go into this.  But then again, the people who devised this know next to nothing about assets or trading in the real world.