Eco news drags down Dow

USD: Dec '24 is Down at 104.080.

Energies: Dec '24 Crude is Up at 67.80.

Financials: The Dec '24 30 Year T-Bond is Up 24 ticks and trading at 118.14.

Indices: The Dec '24 S&P 500 emini ES contract is 18 ticks Higher and trading at 5874.50.

Gold: The Dec'24 Gold contract is trading Up at 2792.50.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, but the 30 Year T-Bond is trading Higher.  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 mainly Lower with the exception of the Aussie and Nikkei trading Higher.  All of Europe is trading Lower. 

Possible challenges to traders

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

• Advance GDP q/q is out at 8:30 AM EST.  This is Major.

• Advance GDP Price Index q/q is out at 8:30 AM EST.  This is Major.

• Pending Home Sales m/m is out at 10 AM EST.  This is Major.

• Crude Oil Inventories is out at 10:30 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 slide Lower at around 8:30 AM EST as the Goods Trade Balance report was released.  The Dow crept Higher at the same time and began its Upward climb.  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 5-minute chart to display better.  This represented a Short opportunity on the 2-year note, as a trader you could have netted about 30 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 - 10/29/24

Dow - Dec 2024- 10/29/24

Bias

Yesterday we gave the4 markets a Neutral or Mixed bias and the indices didn't disappoint.  The Dow 155 points but the S&P and Nasdaq both closed Higher.  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

So yesterday we gave the markets a Neutral or Mixed bias as we saw no evidence of Market Correlation Tuesday morning.  True to form the markets closed Mixed as the Dow dropped but the S&P and Nasdaq both gained.  The economic news reported didn't help as Good Trade Balance came in Lower than expected as did the Jolts Job numbers.  No doubt this helped to drag the Dow down where it remained for most of the session.  Today we have the GDP numbers, and this is always a market mover.  Time will tell if it propels the markets forward.