Debate doesn’t help

USD: Sept '24 is Down at 105.345.

Energies: Aug '24 Crude is Up at 81.93.

Financials: The Sept '24 30 Year T-Bond is Down 36 ticks and trading at 117.06.

Indices: The Sept '24 S&P 500 emini ES contract is 34 ticks Higher and trading at 5530.00.

Gold: The Aug'24 Gold contract is trading Up at 2340.80.  

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, and the 30 Year T-Bond is trading Down.  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 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.   All of Asia traded Higher in the overnight session. Currently all of Europe is trading Higheras well. 

Possible challenges to traders

• 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.

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 Higher at around 8:30 AM EST.  If you look at the charts below the ZT gave a signal at around 8:30 AM and started its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at around 8:30 AM and the ZT moved Higher 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 Long 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 - 06/28/24

Dow - Sept 2024 - 06/28/24

Bias

On Friday we gave the markets an Upside bias as we saw evidence of Market Correlation Friday morning.  However, the markets had other ideas as the Dow dropped 45 points and the other indices lost ground as well.  Today we aren't dealing with a correlated market and our bias is to the Upside.

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

Commentary

Friday came and went and the markets apparently weren't enthused with President Biden's delivery Thursday night during the Presidential debate.  On Friday many were calling for the President to step down from the race, that's how bad it was and on Friday evening the New York Times formally suggested that he step down.  It was suggested that Govenor Gretchen Whitmer of Michigan or Gavin Newsome of California take up the reins which of course perturbed VP Harris. Unfortunately, this is a mess and the markets paid for it Friday.  Will we see a return to normalcy today?  As in all things, only time will tell.