USD: Jun '24 is Up at 105.080.
Energies: Apr '24 Crude is Down at 85.86.
Financials: The June '24 30 Year T-Bond is Up 4 ticks and trading at 115.22.
Indices: The Jun '24 S&P 500 emini ES contract is 67 ticks Lower and trading at 5191.00.
Gold: The Apr'24 Gold contract is trading Up at 2352.40.
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 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 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. All of Asia is trading Higher with the exception of the Sensex and Shanghai exchanges which are Lower. Currently all of Europe is trading Lower.
Possible challenges to traders
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Core PPI m/m is out at 8:30 AM EST. This is Major.
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PPI m/m is out at 8:30 AM EST. This is Major.
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PPI y/y is out at 8:30 AM EST. This is Major.
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Unemployment Claims are out at 8:30 AM EST. This is Major.
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FOMC Member Williams Speaks at 8:45 AM EST. This is Major.
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Natural Gas Storage is out at 10:30 AM EST. This is Major.
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FOMC Member Barkin Speaks at 10 AM EST. This is Major.
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30-y Bond Auction starts at 1 PM EST. Major.
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FOMC Member Bostic Speaks at 1:30 PM EST. Major.
Treasuries
Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.
We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, 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 ZN migrated Higher at around 9:20 AM EST as the S&P hit a High at around the same time. If you look at the charts below the S&P gave a signal at around 9:20 AM and the ZN started its Upward climb. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 9:20 AM and migrated Lower. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about a dozen ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for both the ZN and the S&P are now Jun '24. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.
Charts courtesy of MultiCharts built on an AMP platform
ZN -Jun 2024 - 04/10/24
S&P - Mar 2024 - 04/10/24
Bias
Yesterday we gave the markets a Neutral bias as we didn't much in the way of Market Correlation Wednesday morning. The markets clearly dropped dramatically yesterday as the Dow lost 422 points, the S&P dropped 49 and even the mighty Nasdaq dropped 136 points. Today we aren't dealing with a correlated market and our bias is to the Downside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Yesterday when we created our daily morning broadcast, we said that much of what happens today will be predicated upon the economic news reported. The markets lost no time in reacting to the news reported. The Consumer Price Index (CPI) was the highest reported in 12 months and the indices dropped like a rock on this news. The dropped by over 400 points and the other indices lost ground as well. The significance of this is the Federal Reserve will be more reluctant in wanting to lower interest rates. At this point no one knows when or even if the Fed will lower. They claim they'll do 3 cuts this year but this is predicated upon the economic news reported and should we experience more reports like today; the Fed will be hard pressed to justify a rate reduction. Today we have PPI numbers which the producers and suppliers of products and services use to determine pricing on their end. Think of it as CPI for manufacturing.
Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.
There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.
In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.
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