Govt shutdown averted

USD: Mar '25 is Up at 107.885.

Energies: Feb '25 Crude is Down at 69.27.

Financials: The Mar '25 30 Year T-Bond is Down 3 ticks and trading at 114.13.

Indices: The Mar '25 S&P 500 emini ES contract is 16 ticks Higher and trading at 6005.00.

Gold: The Feb'25 Gold contract is trading Down at 2631.00.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is normal, but the 30 Year T-Bond is trading Lower.  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.  All of Europe is trading Higher. 

Possible challenges to traders

• CB Consumer Confidence is out at 10 AM EST. This is Major.

• Lack of Major Economic News.

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.

On Friday the ZT migrated Lower at around 8:30 AM EST with no news in sight.  The Dow climbed Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:30AM EST and the YM moved Lower 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 Short 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 now Mar '25 and the Dow is still 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 -Mar 2025 - 12/20/24

Dow - Mar 2025- 12/20/24

Bias

On Friday we gave the markets a Downside bias as the indices were correlated that way, but the markets had other ideas.  The Dow migrated Higher by 498 points, but the other indices closed Higher. Today we aren't dealing with a correlated market, and our bias is to the Upside.

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

Commentary

So, Friday was an interesting day as the major issue Musk and Trump had with the proposed budget was, they wanted no debt ceiling to be in place for two years so they could further their agenda.  That agenda consisted of tax breaks for the very wealthy namely people that don't need tax breaks.  That proposal did not pass but a revised one quickly adopted that passed both the House and the Senate and President Biden has swiftly signed into law.  So it appears as though our "new" president will have to deal with a budget proposal in 2025 which he did not want to do.  Oh well Prez there are plenty of things we don't want to do either, but we do it.