Markets slide amidst uncertainty – Friday's downward trend continues

USD: Dec '23 is Down at 106.050.

Energies: Dec '23 Crude is Down at 87.55.

Financials: The Dec '23 30 Year T-Bond is Up 35 ticks and trading at 107.11.

Indices: The Dec '23 S&P 500 emini ES contract is 100 ticks Lower and trading at 4223.50. 

Gold: The Dec'23 Gold contract is trading Down at 1987.80.  

Initial conclusion

This is not a correlated market. The USD is Down and Crude is Down which is not normal, but 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 Lower which is not 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.  All of Asia is traded Lower. All of Europe is trading Lower as well.

Possible challenges to traders

• No Major Economic News to speak of.

• Lack of Major Economic News.

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.  

We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, 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 ZN migrated Higher at around 8:30 AM EST as the S&P hit a High at around the same time. If you look at the charts below the S&P gave a signal at around 8:30 AM and the ZN started its Upward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 8:30 AM and migrated Lower.  These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 30 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '23. The S&P contract is now Dec' 23. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.  

Charts courtesy of MultiCharts built on an AMP platform

ZN - Dec 2023 - 10/20/23

S&P - Dec 2023 - 10/20/23

Bias

Last Friday we gave the markets a Downside bias as both the USD and the bonds were pointed Higher Friday and tis usually reflects a Downside Day. The markets didn't disappoint as the Dow closed Lower by 287 points and the other indices closed Lower 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 the Fedspeak of Thursday drifted into Friday as the markets continued its Downside trend. The Dow drifted Lower by 287 points and the other indices faltered as well. Perhaps it was the news from DC where the House of Representatives still hasn't picked a Speaker as of yet.  Or maybe it was the news from the Middle East where the Israel-Hamas war is raging. The bottom line is the markets was correlated to the Downside and that's where the markets went on Friday. Today we have no economic news to speak of and certainly nothing major to discuss so once the markets will be left to its own devices.