Nonfarm Payrolls on Friday is the main event

USD: Sept '24 is Down at 105.290.

Energies: Aug '24 Crude is Up at 82.88.

Financials: The Sept '24 30 Year T-Bond is Up 7 ticks and trading at 116.28.

Indices: The Sept '24 S&P 500 emini ES contract is 10 ticks Higher and trading at 5571.25.

Gold: The Aug'24 Gold contract is trading Up at 2358.80.

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 Up. 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 mainly Higher in the overnight session with the exception of the Shanghai exchange. Currently all of Europe is trading Higher.

Possible challenges to traders

FOMC Member Williams Speaks at 6:30 AM EST. This is Major.
Challenger Job Cuts y/y is out at 730 AM EST. This is Major.
ADP Non-Farm Employment Change is out at 8:15 AM EST. This is Major.
Unemployment Claims are out at 8:30 AM EST. This is Major.
Trade Balance is out at 8:30 AM EST. This is Major.
Final Services PMI is out at 9:45 AM EST. This is Major.
ISM Services PMI is out at 10 AM EST. This is Major.
Factory Orders m/m is out at 10 AM EST. This is Major.
Crude Oil Inventories are out at 10:30 AM EST. This is Major.
Natural Gas Storage is out at 12 Noon. This is Major.
FOMC Meeting Minutes is out at 2 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 10-year Treasury notes (ZN) 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 8:45 AM EST. If you look at the charts below the ZT gave a signal at around 8:45 AM and started its Downward slide. Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at around 8:45 AM and the ZT moved Lower at around the same time. These charts represent the newest version of BarCharts 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 20 plus ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is Sept and the Dow is now 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 -Sept 2024 - 07/02/24

Dow - Sept 2024 - 07/02/24

Bias

Yesterday we gave the markets a Downside bias as it was correlated to the Downside Tuesday morning. The markets however had other ideas as the indices closed Higher Tuesday. 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 the markets were correlated to the Downside, but a funny thing happened. Fed Chair Powell started speaking at 9:30 AM as soon as the markets opened. He spoke about disinflation meaning that he thinks (or believes) that prices will revert to what they were or go Lower. That is very positive news, and the markets took off with it. Whether or not that happens is yet to be seen. Today we have about 10 economic reports, all of which are major and of course, it's before a major holiday. Whereas the markets will be closed tomorrow for the Fourth of July, they will be open on Friday the 5th. We'll also have Non-Farm Payrolls on Friday as well.

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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.