Today we have Existing Home Sales and Richmond Manufactuing Index

USD: Sept '24 is Up at 104.110.

Energies: Aug '24 Crude is Down at 78.16.

Financials: The Sept '24 30 Year T-Bond is Up 14 ticks and trading at 119.07

Indices: The Sept '24 S&P 500 emini ES contract is 20 ticks Higher and trading at 5614.75.

Gold: The Aug'24 Gold contract is trading Up at 2410.90  

Initial conclusion

This is not a correlated market. The USD is Up and Crude is Down which is 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 Lower which is 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. Asia traded mainly Lower with the exception of the Aussie and Singapore exchanges. Currently all of Europe is trading Higher. 

Possible challenges to traders

• Existing Home Sales is out at 10 AM EST.  This is Major.

• Richmond Manufacturing Index 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.  

Yesterday the ZT migrated Lower at around 8 AM EST with no economic news in sight.  If you look at the charts below the ZT gave a signal at around 8 AM and started its Downward descend.  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 20 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 - 07/22/24

Dow - Sept 2024 - 07/22/24

Bias

Yesterday we gave the markets an Upside bias and the markets didn't disappoint.  The Dow rose 128 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

Yesterday we had no idea how the markets would react to the news that President Biden was stepping down and ending his run for re-election. It truly could have gone either way but apparently the markets viewed the news with enthusiasm as all the indices rose. For us we will just stick to our time-honored tradition of Market Correlation. One thing I will say after hearing Kamala address the Democratic Headquarters in Delaware.  She can motivate a crowd and reminds me of Obama in that respect.  Additionally, after this announcement she has raised over 80 million dollars for her re-election campaign. Whereas yesterday we were light on eco news; today we have Existing Home Sales and Richmond Manufactuing Index.  Hopefully this can keep the momentum moving forward.