Empire State Manufacturing halts rally

USD: Dec '24 is Up at 103.100.

Energies: Nov '24 Crude is Down at 70.22.

Financials: The Dec '24 30 Year T-Bond is Up 11 ticks and trading at 121.13.

Indices: The Dec '24 S&P 500 emini ES contract is 8 ticks Higher and trading at 5864.75.

Gold: The Dec'24 Gold contract is trading Up at 2691.20.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is normal, and 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 Lower which is correlated. Gold is trading Higher which is not correlated with the US dollar trading Up.  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 Shanghai exchange.  Europe is trading mainly Lower with the exception of the London exchange. 

Possible challenges to traders

• Import Prices m/m is out at 8:30 AM EST. This is Major.

• Lack of Major Economic News.

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 Higher at around 8:30 AM EST with the Empire State Manufacturing Index looming and began its Upward Climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM and the ZT moved Higher 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 Long 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 - 10/15/24

Dow - Dec 2024- 10/15/24

Bias

Yesterday we gave the markets a Mixed or Neutral bias as we saw no evidence of market correlation Tuesday morning and the market veered to the Downside with the Dow dropping 325 points and the other indices closed Lower as well.  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 Neutral bias as we saw no evidence of market correlation Tuesday morning.  The Empire State Manufacturing Index came in at a minus or negative 11.7.  This was not what anyone was expecting and the markets traded Lower yesterday.  It is good to see that economic news still plays a factor in these markets.  Today we only have Import Prices and nothing else.  Will this be enough to perhaps turn the markets around?  Only time will tell...