The day after

USD: Sept '24 is Up at 104.190.

Energies: Aug '24 Crude is Up at 78.62.

Financials: The Sept '24 30 Year T-Bond is Up 26 ticks and trading at 121.19

Indices: The Sept '24 S&P 500 emini ES contract is 82 ticks Higher and trading at 5578.50.

Gold: The Aug'24 Gold contract is trading Up at 2479.60  

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 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 Higher which is not correlated. Gold is trading Higher which is not 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 is trading Lower with the exception of the Indian Sensex which is fractionally Higher.   Europe is trading mainly Lower with the exception of the London exchange. 

Possible challenges to traders

• Challenger Job Cuts y/y is out at 7:30 AM EST. This is Major.

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

• Prelim Nonfarm Productivity q/q is out at 8:30 AM EST.  This is Major.

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

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

• ISM Manufacturing PMI is out at 10 AM EST.  This is Major.

• ISM Manufacturing Prices is out at 10 AM EST.  This is Major.

• Construction Spending m/m is out at 10 AM EST.  This is Major.

• Wards Total Vehicle Sales - All Day by Brand

• Natural Gas Storage is out at 10:30 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.  

Yesterday the ZT migrated Lower at around 8 AM EST.  If you look at the charts below the ZT gave a signal at around 8 AM and started its Downward slide.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8 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 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 - 07/31/24

Dow - Sept 2024 - 07/31/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias as it was FOMC Day, and we always maintain a Neutral bias on that day.  The markets leapt Higher as the Dow closed Higher by 99 points and the other indices closed Higher 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

Yesterday as we suggested the Fed didn't reduce or cut interest rates but after the announcement the Fed suggested a possible rate reductio as early as the next FOMC meeting which happens to be in September.  Once this came out the markets leapt to the Upside and the Nasdaq gained an astounding 452 points.  IT would be wise of the Fed to do this is September as we are getting the holiday spending season and even Back to School as a major retail event.  This would do much to accelerate consumer spending with real estate and autos given top priority.  Today we have a virtual tsunami of news events with Vehicle Sales being one of those reports.  Will the Fed reduce in September?  As in all things, only time will tell....