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 Lower and Crude is trading Higher which is 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 mainly Higher with the exception of the Hang Seng which is Lower. Currently all of Europe is trading Lower.

Possible challenges to traders

NFIB Small Business Index is out at 6 AM EST. This is Major.
Trade Balance is out at 8:30 AM EST. This is Major.
RCM/TIPP Economic Optimism - Tentative. This is Major.
FOMC Member Barr Speaks at 12 noon EST. This is Major.

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.

Yesterday the ZN migrated Higher at around 9 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 9 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 9 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 a 20 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar '24. The S&P contract is now Mar' 24. 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 - Mar 2024 - 01/08/24

S&P - Mar 2024 - 01/08/24

Bias

Yesterday we gave the markets a Neutral bias as we didn't see much in the way of correlation Monday morning. The markets migrated Higher as the Dow gained 217 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

Yesterday it was difficult to tell what the market direction would be and as such gave the markets a Neutral bias which means it could go anywhere. But what surprised us was there wasn't any real, major economic news on tap yesterday, yet the indices soared. All three major indices leaped to the Upside. I get the old saying is correct, sometime no news is good news. Today we have Trade Balance and an FOMC member speaking. Will this be enough to keep the momentum moving forward? As in all things, only time will tell.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD holds firm near 1.1850 amid USD weakness

EUR/USD remains strongly bid around 1.1850 in European trading on Monday. The USD/JPY slide-led broad US Dollar weakness helps the pair build on Friday's recovery ahead of the Eurozone Sentix Investor Confidence data for February.

GBP/USD hovers near 1.3600 as UK government crisis weighs on Pound Sterling

GBP/USD moves sideways after registering modest gains in the previous session, trading around 1.3610 during the European hours on Monday. The pair could come under pressure as the Pound Sterling may weaken amid a fresh government crisis in the United Kingdom.

Gold remains supported by China's buying and USD weakness as traders eye US data

Gold struggles to capitalize on its intraday move up and remains below the $5,100 mark heading into the European session amid mixed cues. Data released over the weekend showed that the People's Bank of China extended its buying spree for a 15th month in January. Moreover, dovish US Fed expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.

Cardano steadies as whale selling caps recovery

Cardano (ADA) steadies at $0.27 at the time of writing on Monday after slipping more than 5% in the previous week. On-chain data indicate a bearish trend, with certain whales offloading ADA. However, the technical outlook suggests bearish momentum is weakening, raising the possibility of a short-term relief rebound if buying interest picks up.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Bitcoin, Ethereum, and Ripple prices consolidated on Monday after correcting by nearly 9%, 8%, and 10% in the previous week, respectively. BTC is hovering around $70,000, while ETH and XRP are facing rejection at key levels. Traders should be cautious: despite recent stabilization, upside recovery for these top three cryptocurrencies is capped as the broader trend remains bearish.