Markets react to US Democratic economic plans amid uncertainty as DNC kicks off

USD: Sept '24 is Down at 102.060.

Energies: Sept '24 Crude is Down at 74.82.

Financials: The Sept '24 30 Year T-Bond is Up 9 ticks and trading at 123.31.

Indices: The Sept '24 S&P 500 emini ES contract is 10 ticks Lower and trading at 5575.75.

Gold: The Dec'24 Gold contract is trading Down at 2582.00.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Down which is not normal, but 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 Lower and Crude is trading Lower which is not correlated. Gold is trading Lower which is not 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 trading mainly Mixed.  All of Europe is trading mainly Higher except the London exchange.

Possible challenges to traders

• FOMC Member Waller Speaks at 9:15 AM EST. This is Major.

• CB Leading Index m/m 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 10-year Treasury notes (ZN) 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.

On Friday the ZT migrated Higher at around 8:30 AM EST. If you look at the charts below the ZT gave a signal at around 8:30 AM after the 8:30 AM reports were released and started 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 BarCharts, 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 30 plus ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is Sept and the Dow is now 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 -Sept 2024 - 08/16

Dow - Sept 2024- 08/16/24

Bias

On Friday we gave the markets a Downside bias as we didn't see any semblance of Market Correlation. The markets had other ideas as the Dow gained 97 points and the other indices gained ground 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

On Friday we witnessed a continuation of what we saw on Thursday, the markets up on the economic plan and policy of the Democrats. They have promised much for the time ahead but are very light on telling us how all of this will be paid for. The Republicans do the same thing so the question is who will keep their word and who won't. Today we are light on economic news as we only have two reports. Leading Index and an FOMC member speaking.  Today the Democratic National Convention starts so it's now the Dems turn.