This is not a correlated market. The dollar is Up+ and Crude is Up+ which is not normal but the 30 year Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is lower then 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. All of Asia is trading Lower. Conversely all of Europe is trading Higher.

Possible challenges to traders today

Challenger Job Cuts y/y is out at 7:30 AM EST. This is Major.
Unemployment Claims is out at 8:30 AM EST. This is Major.
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.
Construction Spending m/m is out at 10 AM EST. This is Major.
ISM Manufacturing Prices is out at 10 AM EST. This is Major.
Wards Total Vehicle Sales - All Day. This is Major.
Natural Gas Storage is out at 10:30 AM EST. This is Major.

Bias

Yesterday we gave the markets a Downside as both the USD and the Bonds were trading Higher Thursday morning and that is usually indicative of a Downside day. The markets had other ideas as the Dow closed Higher by 210 points, the S&P was Higher by 6 and the Nasdaq traded Lower by 24. Today we aren't dealing with a correlated market and our bias is Neutral.

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

Commentary

Each and every day we say that the markets could change and they often do. Yesterday was no exception as the markets were correlated Lower but the economic news reported came in mainly positive and served to drive the markets Higher. ADP Employment Change came in at 692,000 versus 555,000 expected. Pending Home Sales came in much higher than the previous period at 8.0% versus a minus 4.4% reported last month. Today we have about 8 major economic reports that could serve to drive market direction today. Such reports as Total Vehicle Sales, Unemployment Claims, Construction Spending are all major and proven market movers. But as in all things only time will tell...

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD extends its optimism past 1.1900

EUR/USD retains a firm underlying bid, surpassing the 1.1900 mark as the NA session draws to a close on Monday. The pair’s persistent uptrend comes as the US Dollar remains on the defensive, with traders staying cautious ahead of upcoming US NFP prints and CPI data.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold picks up pace, retargets $5,100

Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.

XRP struggles around $1.40 despite institutional inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.