News tsunami doesn't torpedo markets

USD: Dec '24 is Down at 103.475.

Energies: Nov '24 Crude is Down at 69.82.

Financials: The Dec '24 30 Year T-Bond is Down 4 ticks and trading at 119.28.

Indices: The Dec '24 S&P 500 emini ES contract is 48 ticks Higher and trading at 5899.00.

Gold: The Dec'24 Gold contract is trading Up at 2727.00.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Down which is not normal, and 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 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. All of Asia traded Higher.  All of Europe is trading Higher with the exception of the London and Spanish IBEX exchanges. 

Possible challenges to traders

• Building Permits is out at 8:30 AM EST. This is Major.

• Housing Starts is out at 8:30 AM EST. This is Major.

• FOMC Member Waller speaks at 12:10 PM EST. This is Major.

• Federal Budget Balance is tentative. 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 Lower at around 8:30 AM EST as we had several economic reports at the same time 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 40 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 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 - 10/17/24

Dow - Dec 2024- 17/24

Bias

Yesterday we gave the markets an Upside bias as the USD and the Bonds were trading Lower Thursday morning and the markets (for the most part) kept its Upside momentum with the Dow gaining 161 points with only the S&P dropping by 1 point.  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

Yesterday we had a true news tsunami with about 13 economic reports scheduled for release.  This did not deter the market momentum as only the S&P dropped by one point, which isn't bad considered the number of reports scheduled. Today we have Building Permits and Housing Starts which are key to the real estate markets. Will this continue the positive momentum of late? Only time will tell.