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 Lower which is 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 Higher with the exception of the Shanghai exchange. Currently all of Europe is trading Lower.

Possible challenges to traders

FOMC Member Bowman Speaks at 7 AM EST. This is Major.
S&P/CS Composite-20 HPI y/y is out at 9 AM EST. This is Major.
HPI m/m is out at 9 AM EST. This is Major.
CB Consumer Confidence is out at 10 AM EST. This is Major.
Richmond Manufacturing Index is out at 10 AM EST. This is Major.
FOMC Member Cook Speaks at 12 noon. This is Major.
FOMC Member Bowman Speaks at 2:10 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 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 with no economic news in sight. 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 a dozen 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 - 06/24/24

Dow - Sept 2024 - 06/24/24

Bias

Yesterday, we gave the markets am Upside bias as both the USD and the Bonds were Higher Monday morning and that usually reflects an Upside Day. The Dow did close Higher by 261 points, the other indices traded Lower on the session. Today we aren't dealing with a correlated market and our bias is Mixed or Neutral.

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

Commentary

Yesterday the only economic news we had was an FOMC member speaking at 2 PM Monday afternoon. We didn't have much of a market change after this member spoke. Today we have more in the way of economic news as we have Home Price Index and Richmond Manufacturing Index numbers. Home Price Index is especially major as real estate is still a viable asset in the US economy. Unfortunately, it would be great if our all wise and all-knowing Federal Reserve understood that and decided to start lowering rates. Then perhaps more people could start buying homes and really boost the US economy. Perhaps "Uncle Joe" Biden could talk to these people and enlighten them but personally I don't think he has the guts for it.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.