Happy Labor day

USD: Sept '24 is Up at 101.305.

Energies: Oct '24 Crude is Down at 75.67.

Financials: The Dec '24 30 Year T-Bond is Up 9 ticks and trading at 124.02.

Indices: The Sept '24 S&P 500 emini ES contract is 96 ticks Higher and trading at 5634.00.

Gold: The Dec'24 Gold contract is trading Down at 2554.20.

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 Up.  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 Lower which is 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. Currently all of Asia and Europe are trading Higher.

Possible challenges to traders

• Core PCE Price Index m/m is out at 8:30 AM EST.  This is Major.

• Personal Income m/m is out at 8:30 AM EST.  This is Major.

• Personal Spending m/m is out at 8:30 AM EST.  This is Major.

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

• Revised UOM Consumer Sentiment is out at 10 AM EST.  This is not Major.

• Revised UOM Inflation Expectations is out at 10 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 after the GDP numbers were released 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 30 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 - 08/29/24

Dow - Sept 2024- 08/29/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias as we saw no correlation at all Thursday morning.  The markets traded Mixed as the Dow gained 244 points but the other indices lost ground and closed Lower.  Today we aren't dealing with a 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 we saw the same situation as we did earlier in the week where every instrument we use for Market Correlation purposes traded Higher Thursday morning.  This was a classic case of all boats rising.  As such we gave the markets a Neutral or Mixed bias.  The markets gained ground after the GDP numbers were released and they beat expectation.  However by the end of the session it was as predicted and closed Mixed.  Today is the last trading day for August, 2024 and Monday is the Labor Day Holiday.  We wish all of you a very happy Labor Day, we'll be back on Tuesday, September 3rd.