It looks like we might be in the scenario of one day down, next day up

USD: Dec '24 is Up at 102.380.

Energies: Nov '24 Crude is Down at 73.18.

Financials: The Dec '24 30 Year T-Bond is Up 5 ticks and trading at 121.09.

Indices: The Dec '24 S&P 500 emini ES contract is 4 ticks Lower and trading at 5799.00.

Gold: The Dec'24 Gold contract is trading Up at 2640.20.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is 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 Lower which is not 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 is trading Mixed with half the exchanges Lower and the other half Higher.  All of Europe is trading Higher except the Spanish Ibex exchange. 

Possible challenges to traders

FOMC Member Bostic Speaks at 8 AM EST.  This is Major.

FOMC Member Logan Speaks at 9:15 AM EST.  This is Major.

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

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

FOMC Member Goolsbee Speaks at 10:30 AM EST.  This is Major.

FOMC Member Jefferson Speaks at 12:30 PM EST.  This is Major.

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

FOMC Meeting Minutes 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 8:45 AM EST with no real economic news in sight and began its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:45 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 20 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 - 10/08/24

Dow - Dec 2024- 10/08/24

Bias

Yesterday we gave the markets an Upside bias as the USD, Crude and the Bonds were all trading Lower Tuesday morning and that usually reflects an Up Day.  The markets didn't disappoint as the Dow closed Higher by 126 points and the other indices gained ground 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

Well, it looks like we might be in the scenario of One Day Down, next Day Up.  The problem with this is it works until it doesn't work.  For us we don't rely on markets doing that; we rely on our own analysis and our rules of Market Correlation.  Today we have far more economic news than we've seen in a few days.  The 10-year Bond Auction and the Fed Meeting Minutes will have an impact on this market and time will tell how it will affect direction.