FOMC day came and went

USD: Dec '24 is Down at 104.355.

Energies: Dec '24 Crude is Down at 71.42.

Financials: The Dec '24 30 Year T-Bond is Up 12 ticks and trading at 117.12.

Indices: The Dec '24 S&P 500 emini ES contract is 35 ticks Lower and trading at 5997.50.

Gold: The Dec'24 Gold contract is trading Down at 2697.40.

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 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 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 traded Mixed.  All of Europe is trading mainly Lower except the Spanish Ibex exchange. 

Possible challenges to traders

• Prelim UoM Consumer Sentiment is out at 10 AM EST.  This is Major.

• Prelim UOM Inflation Expectations is out at 10 AM EST.  This is Major.

• Prelim Unit Labor Costs q/q is out at 8:30 AM EST.  This is Major.

• Mortgage Delinquencies - tentative.  This is Major.

• FOMC Member Bowman Speaks at 11 AM EST.  This is Major.

• FOMC Member Musalem Speaks at 2:30 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 leapt Higher at around 7:30 AM EST with no economic news reported.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:30 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 - 11/07/24

Dow - Dec 2024- 11/07/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias and the markets didn't disappoint.  The Dow closed Lower by one point, but the other indices did migrate into positive territory.  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

Oh well, FOMC Day came and went, and the Fed did cut the Overnight Rate by a quarter point down to 4.75% from the 5% it was previous.  I suspect the markets wanted more because after the news was announced the market didn't shoot for Higher Highs.  The Dow closed one point Lower, but the other indices did manage to migrate into positive territory.  Today we have the UOM (University of Michigan) numbers for inflation and consumer sentiment, always a market mover and we have a couple of FOMC members speaking.  Perhaps they can provide more insight on the Fed's doing.  Last Friday we suggested that the Fed wouldn't raise rates due to the lousy jobs report and they didn't, but they didn't Lower by much either.