Today we have the all-important CPI numbers

USD: Dec '24 is Up at 105.955.

Energies: Dec '24 Crude is Up at 68.75.

Financials: The Dec '24 30 Year T-Bond is Up 8 ticks and trading at 116.18.

Indices: The Dec '24 S&P 500 emini ES contract is 42 ticks Lower and trading at 6002.50.

Gold: The Dec'24 Gold contract is trading Up at 2614.70.

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 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 Higher 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 Shanghai and Singapore exchanges.  All of Europe is trading Higher. 

Possible challenges to traders

• Core CPI m/m is out at 8:30 AM EST.  This is Major.

• CPI m/m is out at 8:30 AM EST.  This is Major.

• CPI y/y is out at 8:30 AM EST.  This is Major.

• FOMC Member Kashkari Speaks at 8:30 AM EST.  This is Major.

• FOMC Member Logan Speaks at 9:45 AM EST.  This is Major.

• FOMC Member Musalem Speaks at 1 PM EST.  This is Major.

• FOMC Member Schmid Speaks at 1:30 PM EST.  This is Major.

• Federal Budget Balance is out at 2 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 2-year Treasury notes (ZT) 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 reported at that time.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM and the ZT moved Higher at around the same time.  These charts represent the newest version of Bar Charts, 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 15 ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is Dec and the Dow is now Dec '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 -Dec 2024 - 11/12/24

Dow - Dec 2024- 11/12/24

Bias

Yesterday we gave the markets a Downside bias and the markets didn't disappoint.  The Dow closed Lower by 382 points and the other indices closed Lower as well.  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

So yesterday we learned that the President-elect isn't wasting time staffing his administration.  He's already chosen his Chief of Staff, Secretary of State and a new Border Czar who no doubt will do a far better job than the previous "czar."  He's doing this and suggesting that he doesn't need Congressional confirmation to do so.  The markets themselves did not respond favorably as they all traded Lower.  Today we have the all-important CPI numbers that the Federal Reserve will review carefully as this is a major component to determine interest rates.