FOMC day

USD: Sept '24 is Down at 103.895.

Energies: Aug '24 Crude is Up at 76.79.

Financials: The Sept '24 30 Year T-Bond is Up 3 ticks and trading at 120.09

Indices: The Sept '24 S&P 500 emini ES contract is 212 ticks Higher and trading at 5525.50.

Gold: The Aug'24 Gold contract is trading Up at 2463.60  

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 all of Asia is trading Higher. Europe is trading mainly Higher with the exception of the Spanish exchange. 

Possible challenges to traders

• ADP Non-Farm Employment Change is out at 8:15 AM EST. This is Major.

• Employment Cost Index q/q is out at 8:30 AM EST.  This is Major.

• Chicago PMI is out at 9:45 AM EST.  This is Major.

• Pending Home Sales m/m is out at 10 AM EST.  This is Major.

• Crude Oil Inventories is out at 10:30 AM EST.  This is Major.

• Federal Funds Rate is out at 2 PM EST.  This is Major.

• FOMC Statement is out at 2 PM EST.  This is Major.

• FOMC Press Conference starts at 2:30 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 9 AM EST with no economic news to report.  If you look at the charts below the ZT gave a signal at around 9 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 9 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 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 - 07/30/24

Dow - Sept 2024 - 07/30/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias and they didn't disappoint. The Dow closed 203 points Higher but the S&P and Nasdaq both traded Lower. Today is FOMC Day and as is our custom we will retain a Neutral or Mixed bias.

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

Commentary

Yesterday we gave the markets a Mixed or Neutral bias as we didn't see much in the way of market correlation Tuesday morning.  The markets didn't disappoint as the indices closed Mixed Tuesday with the Dow Higher, but the other indices closed Lower.  Today is FOMC Day and for those of you who've been with us awhile, our bias is Neutral or Mixed.  Why?  Because the markets have never shown any sense of normalcy on this day.  Do I think the Fed will reduce interest rates?  Unfortunately, no.  Whereas I think the Federal Reserve should reduce rates, they want more reason or proof that they should.  I don't know what it will take to convince them that they should.  They've been talking about rate reductions for nearly a year now yet have taken no action to do so.  This will clearly help consumer spending and the real estate markets but yet they are reluctant to do so.  Could this change?  Of course, anything can happen in a volatile market.