Mixed market doesn't disappoint

USD: Dec '24 is Down at 100.010.

Energies: Nov '24 Crude is Down at 67.70.

Financials: The Dec '24 30 Year T-Bond is Down 7 ticks and trading at 124.21.

Indices: The Dec '24 S&P 500 emini ES contract is 10 ticks Lower and trading at 5801.50.

Gold: The Dec'24 Gold contract is trading Down at 2659.90.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Down 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 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 with half the exchanges Higher and the other half Lower.  All of Europe is trading Lower. 

Possible challenges to traders

• FOMC Member Bowman Speaks at 8:50 AM EST.  This is Major.

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

• Fed Chair Powell Speaks at 1:55 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.

Last Friday the ZT migrated Higher at around 8:30 AM EST as the economic news was released 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 0 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 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 - 09/27/24

Dow - Dec 2024- 09/27/24

Bias

On Friday we gave the markets a Neutral or Mixed bias as we didn't see much evidence of Market Correlation Friday morning.  The markets however didn't disappoint as the Dow closed 138 points Higher but the S&P and Nasdaq both closed Lower.  All in all, a Neutral or Mixed day.  Today we aren't dealing with a correlated market and or bias will remain Neutral or Mixed.

Could this change? Of Course. Remember anything can happen in a volatile market. 

Commentary

On Friday we witnessed a near perfect example of market correlation in action.  The personal income and spending numbers were released at 8:30 am EST and both came in Lower which propelled the markets Lower, which in turn propelled the bonds and notes Higher.  Remember when one goes down the other rises.  Today we have Chicago PMI and Fed Chair Powell will speak this morning, both of which are major.