Markets take a U turn

USD: Mar '25 is Up at 109.005.

Energies: Feb '25 Crude is Up at 74.73.

Financials: The Mar '25 30 Year T-Bond is Down 10 ticks and trading at 111.27.

Indices: The Mar '25 S&P 500 emini ES contract is 2 ticks Lower and trading at 5953.75.

Gold: The Feb'25 Gold contract is trading Down at 2662.90.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not normal, and the 30 Year T-Bond is trading Lower.  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 Higher 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. Asia traded Lower with the exception of the Shanghai and Singapore exchanges.  Europe is trading Higher with the exception of the German Dax and Paris exchanges. 

Possible challenges to traders

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

• Unemployment Claims are out at 8:30 AM EST.  This is Major.

• FOMC Member Waller Speaks at 8:30 AM EST.  This is Major.

• Final Wholesale Inventories m/m is out at 10 AM EST.  This is Major.

• Crude Oil Inventories is out at 10:30 AM EST.  This is Major.

• Natural Gas Storage is out at 12 noon.  This is Major.

• 30 Year Bond Auction Starts at 1PM EST.  This is Major.

• FOMC Meeting Minutes is out at 2 PM EST.  This is Major.

• Consumer Credit m/m is out at 3 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 migrated Lower at around 7 AM EST with no economic news to speak of.  The Dow moved Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 7 AM EST 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 20 plus ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is now Mar '25 and the Dow is now Mar '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Mar 2025 - 1/07/25

Dow - Mar 2025- 1/07/25

Bias

Yesterday we gave the markets an Upside bias however the markets had other ideas as the indices migrated into negative territory in the afternoon and remained there for the rest of the session.  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 when we arose and viewed the markets we gave them an upside bias as they were correlated that way.  The markets however made a u turn in the afternoon and remained there for the balance of the session.  Today we have a virtual tsunami of economic news as there are about 9 reports, all of which are major.  Some of the news items that would ordinarily be reported on Thursday have been moved up to Wednesday and I suspect the reason is because of former President Carter's funeral.  We hope that some of the news reported will move the markets in a positive direction.  But as in all things, only time will tell.