This is not a correlated market. The dollar is Up, and Crude is Up which is not normal, and the 30-year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower, 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. Currently all of Asia is trading Lower. All of Europe is trading Lower as well.

Possible challenges to traders today

Mortgage Delinquencies - tentative. This is Major.
FOMC Member Bullard Speaks at 11 AM 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.

On Friday the ZN made its move at around 11:30 AM EST. The ZN hit a Low around that time and the S&P moved Lower. If you look at the charts below ZN gave a signal at around 11:30 AM EST and the S&P moved Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 11:30 AM EST and the S&P was moving Lower shortly thereafter. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 30-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 50 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar '22. The S&P contract is now Mar '22 as well. I've changed the format to Renko bars such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN - Mar 2022 - 02/11/22

S&P - Mar 2022 - 02/11/22

Bias

On Friday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher, and this usually reflects a Downside Day. The Markets didn't disappoint as the Dow dropped 504 points and the other indices lost 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

When we looked at the markets early Friday AM as is our custom, we felt a continuation of Thursday's slide. However early in the trading session it appeared as though the markets wanted to migrate Higher, after 10 AM that changed. The markets dived Lower and remained in negative territory for the remainder of the session. News came out that suggested a Russian invasion of the Ukraine was imminent and may in fact happen prior to the conclusion of the Winter Olympics currently being held in China. The impact of such an event cannot be underestimated. Russia supplies most of Europe with well needed natural gas used for cooking and heating homes. Natural Gas is already trading Higher due to the Winter season, this invasion will drive it Higher even further. The political aspect of this shouldn't be overlooked either. Putin claims that he doesn't want a NATO nation right next door to Russia but if he overtakes the Ukraine, what is right next door? Poland, a NATO nation. So, the question is when will enough be enough? Only time will tell.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD softens to near 1.3600 as BoE hints further rate cuts

The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.

Gold holds gains near $5,000 as China's gold buying drives demand

Gold price clings to the latest uptick near $5,000 in Asian trading on Monday. The precious metal holds its recovery amid a weaker US Dollar and rising demand from the Chinese central bank. The delayed release of the US employment report for January will be in the spotlight later this week.

Bitcoin Weekly Forecast: The worst may be behind us

Bitcoin price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.

Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle

Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.