Job numbers don’t help

USD: Sept '24 is Up at 101.600.

Energies: Oct '24 Crude is Up at 68.28.

Financials: The Dec '24 30 Year T-Bond is Down 20 ticks and trading at 125.08.

Indices: The Sept '24 S&P 500 emini ES contract is 164 ticks Higher and trading at 5460.50.

Gold: The Dec'24 Gold contract is trading Down at 2524.30.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not 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 Higher which is not 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. Currently  Asia is trading Lower with the exception of the Indian Sensex and the Singapore exchanges.  Currently all of Europe is trading Higher.

Possible challenges to traders

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

• Consumer Credit m/m is out at 3 PM 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 after the Job numbers came out and began its Downward slide.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:30 AM and the ZT 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 50 plus 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 still 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 -Dec 2024 - 09/06/24

Dow - Sept 2024- 09/06/24

Bias

On Friday we gave the markets a Neutral or Mixed bias as it was Jobs Friday and we always maintain a Neutral or Mixed bias on that day. The Dow dropped 410 points and the other indices lost ground as well.  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

Well another Jobs Friday and despite the fact that the US economy created 142,000 net new jobs, it did not meet the expectation of 164,000 expected. As a result the markets lost ground fast with major indices dropping.  The Dow dropped 410 points but the S&P lost 95 and the Nasdaq dropped 436 points. This is the problem when the markets are priced for perfection, the expectation is that all economic reports will be perfect but that is not reality. The issue is perfection becomes reality but that is a mirage and not realistic.  The good news was the unemployment rate dropped a tick to 4.2% versus 4.3 that is was prior.  The other good news came from FOMC Member Goolsbee who predicts that when the Fed starts to cut rates they will do so in half point increments or 50 basis points.  From our perspective the more the merrier as cutting interest rates is a good assurance for continued economic activity.