Downtrend continues

USD: Sept '24 is Down at 102.900.

Energies: Sept '24 Crude is Up at 75.27.

Financials: The Sept '24 30 Year T-Bond is Up 19 ticks and trading at 123.01.

Indices: The Sept '24 S&P 500 emini ES contract is 16 ticks Higher and trading at 5231.50.

Gold: The Dec'24 Gold contract is trading Up at 2449.90.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, but 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 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.  Currently Asia is trading mixed.  All of Europe is trading Lower at the present time. 

Possible challenges to traders

• Unemployment Claims is out at 8:30 AM EST. This is Major.

• Final Wholesale Inventories m/m is out at 10 AM EST. This is Major.

• Natural Gas Storage is out at 10:30 AM EST. This is Major.

• 30-y Bond Auction starts at 1 PM EST. This is Major.

• Mortgage Delinquencies - tentative. This is Major.

• FOMC Member Barkin Speaks at 3 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 7:30 AM EST.  If you look at the charts below the ZT gave a signal at around 7:30 AM with no real economic news is sight and started its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:30 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 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 - 08/07/24

Dow - Sept 2024 - 08/07/24

Bias

Yesterday we gave the markets a Upside bias, but the markets had other plans. The Dow dropped 234 points with no real economic news to speak of. The other indices lost 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 the markets were poised to move Higher and in fact they did gain ground until 2 PM EST.  It is rumored that the terrorist group Hezbollah has decided to stag an attack on Israel even without backing from Iran. Of course, this is yet to be seen but the terrorists wanted to scare the markets, and they did. The markets are of course the most unstable environments as anything can happen to drive the markets in any direction at any given moment. Whereas the markets are unstable, they do not like instability and geopolitical events are one of them. So, the question is what will happen today and of course, only time will tell.