Saved by the bell

USD: Dec '24 is Up at 100.825.

Energies: Nov '24 Crude is Down at 67.69.

Financials: The Dec '24 30 Year T-Bond is Up 32 ticks and trading at 125.06.

Indices: The Dec '24 S&P 500 emini ES contract is 17 ticks Lower and trading at 5810.00.

Gold: The Dec'24 Gold contract is trading Up at 2671.70.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is normal, and 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 Lower and Crude is trading Lower which is not 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 traded Higher with the exception of the Sensex and Singapore exchanges.  Europe is trading Higher with the exception of the Paris and Spanish IBEX exchanges. 

Possible challenges to traders

• Final Manufacturing PMI is out at 9:45 AM EST.  This is Major.

• ISM Manufacturing PMI is out at 10 AM EST.  This is Major.

• JOLTS Job Openings is out at 10 AM EST.  This is Major. 

• ISM Manufacturing Prices is out at 10 AM EST.  This is Major.

• Construction Spending is out at 10 AM EST.  This is Major.

• Wards Total Vehicle Sales is out all day - by brand.  Major.

• FOMC Member Bostic Speaks at 11 AM EST.  This is Major.

• FOMC Member Cook Speaks at 11:10 AM 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 8:30 AM EST with no real economic news in sight and began its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 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 20 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 - 09/30/24

Dow - Dec 2024- 09/30/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias as we saw no market correlation at all Monday morning.  We were dealing with a situation where everything traded Lower and whenever each instrument is trading Lower or conversely Higher, there is no correlation.  The markets managed a slight gain on the day as the Dow closed 17 points Higher and the other indices managed a slight gain.  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 we witnessed a situation that we rarely ever see.  All of the instruments that we use for Market Correlation purposes were all Lower Monday morning and that very rarely happens.  The markets were all Lower yesterday up until the last few minutes of trading when they all turned positive.  It sounds like the Smart Money didn't want a lower market yesterday especially given the fact that yesterday was the end of the third calendar quarter.  Today we have much economic news to report liken to PMI reporting and Jolts Job Openings, both of which are major.  Will these reports change market direction?  Only time will tell.