Election day, 2024

USD: Dec '24 is Down at 103.630.

Energies: Dec '24 Crude is Up at 71.71.

Financials: The Dec '24 30 Year T-Bond is Up 1 tick and trading at 117.23.

Indices: The Dec '24 S&P 500 emini ES contract is 52 ticks Higher and trading at 5756.25.

Gold: The Dec'24 Gold contract is trading Up at 2751.50.

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. All of Asia traded Higher.  All of Europe is trading mainly Higher except the Milan exchange. 

Possible challenges to traders

• Trade Balance is out at 8:30 AM EST.  This is Major.

• ISM Services PMI is out at 10 AM EST.  This is Major.

• 10 Year Bond Auction starts at 1 PM 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 dropped Lower at around 8:30 AM EST with no economic news in sight.  The Dow climbed Higher at the same time.  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 a dozen 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 - 11/04/24

Dow - Dec 2024- 11/04/24

Bias

Yesterday we gave the markets a Downside bias and the markets didn't disappoint as the Dow dropped 258 points and the other indices lost ground as well.  Given that today is Election Day in the United States, our bias is Neutral or Mixed.

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

Commentary

So yesterday we were on the eve of the Presidential Election that is taking place today.  In 24 hours, we will learn who will guide the United States for the next four years.  It is always a day of elation or not depending upon your choices.  Yesterday we just followed our rules for market correlation, and it didn't let us down.  What will the markets do today?  As with the election itself, only time will tell....