Nick Mastrandrea
Market Tea Leaves
USD: Dec '24 is Down at 106.390.
Energies: Jan '25 Crude is Up at 69.05.
Financials: The Dec '24 30 Year T-Bond is Up 12 ticks and trading at 118.08.
Indices: The Dec '24 S&P 500 emini ES contract is 35 ticks Higher and trading at 6030.50.
Gold: The Dec'24 Gold contract is trading Up at 2650.80.
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 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 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. Asia traded Higher with the exception of the Nikkei and Singapore exchanges. All of Europe is trading Lower except the London exchange.
Possible challenges to traders
-
Prelim GDP q/q is out at 8:30 AM EST. This is Major.
-
Unemployment Claims is out at 8:30 AM EST. This is Major.
-
Core Durable Goods Orders m/m is out at 8:30 AM EST. This is Major.
-
Durable Goods Orders is out at 8:30 AM EST. This is Major.
-
Prelim GDP Price Index q/q is out at 8:30 AM EST. This is Major.
-
Good Trade Balance is out at 8:30 AM EST. This is Major.
-
Prelim Wholesale Inventories m/m is out at 8:30 AM EST. This is Major.
-
Chicago PMI is out at 9:45 AM EST. This is Major.
-
Core PCE Price Index m/m is out at 10 AM EST. This is Major.
-
Pending Home Sales m/m is out at 10 AM EST. This is Major.
-
Personal Income m/m is out at 10 AM EST. This is Major.
-
Personal Spending m/m is out at 10 AM EST. This is Major.
-
Crude Oil Inventories is out at 10:30 AM EST. This is Major.
-
Natural Gas Storage is out at 12 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 7:05 AM EST with no economic news pending. The Dow migrated Lower at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:30 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 a dozen 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 - 11/26/24
Dow - Dec 2024- 11/26/24
Bias
Yesterday we gave the markets an Upside bias and the markets didn't disappoint. The Dow gained 124 points, and the other indices gained ground as well. Today we aren't dealing with a correlated market, and our bias is Neutral or Mixed.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Yesterday we gave the markets an Upside bias because the USD and the Bonds were Lower and that usually signals an Upside Day. The markets didn't disappoint as they traded Higher as suggested. Today we have a virtual news tsunami as we have 14 different economic reports due to the Thanksgiving Day holiday. So, anything that would have been reported tomorrow was rolled into today. The markets are closed tomorrow, and we will see an abbreviated session on Friday with the markets closing at 1 PM EST. Please do enjoy your holiday, we will be back on Monday, December 2nd.
Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.
There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.
In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.
Recommended Content
Editors’ Picks
US PCE matched consensus in October – LIVE
The U.S. Department of Commerce announced that annual headline Personal Consumption Expenditures (PCE) inflation climbed to 2.3% in October, with core PCE inflation—a key measure excluding food and energy—rising slightly higher at 2.8% over the same period.
EUR/USD retreats from tops post-US PCE, back near 1.0540
The bearish sentiment in the US Dollar remains in place and supports EUR/USD's constructive outlook, keeping it in the 1.0540 region after the release of US inflation data, as measured by the PCE, on Wednesday.
GBP/USD recedes to 1.2640 on US PCE data
GBP/USD remains positively oriented in the 1.2640 zone as the Greenback experiences a marked pullback following the PCE inflation release.
Gold remains sidelined near $2,640 following US inflation prints
Gold remains on the positive foot near $2,640 per troy ounce, as US inflation data matched initial estimates in October, while US yields display a negative performance across the curve.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.