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 Lower and Crude is trading Lower which is not correlated. Gold is trading Lower which is not 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 is trading Higher with the exception of the Nikkei and Hang Seng exchanges which are Lower. Currently all of Europe is trading Higher with the exception of the Spanish IBEX and Paris exchanges which are Lower.

Possible challenges to traders

Core PCE Price Index m/m out at 8:30 AM EST. This is Major.
Unemployment Claims are out at 8:30 AM EST. This is Major.
Personal Income m/m is out at 8:30 AM EST. This is Major.
Personal Spending is out at 8:30 AM EST. This is Major.
Chicago PMI is out at 9:45 AM EST. This is Major.
Pending Home Sales m/m is out at 10 AM EST. This is Major.
Natural Gas Storage is out at 10:30 AM EST. This is Major.
FOMC Member Bostic Speaks at 10:50 AM EST. This is Major.
FOMC Member Mester Speaks at 1:15 PM 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 11 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 11 AM and the ZN started its Upward slide. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 11 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 18 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '24. The S&P contract is still 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 - 02/28/24

S&P - Mar 2024 - 02/28/24

Bias

Yesterday morning we gave the markets a Downside bias as both the USD and the Bonds were trading Higher Wednesday morning, and this usually represents a Down day. The markets didn't disappoint as the Dow traded 23 points Lower and the other indices lost ground as well. Today we aren't dealing with a correlated market and our bias is Neutral,

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

Yesterday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher Wednesday morning and that usually reflects a Downside Day. The markets didn't disappoint us as all the indices traded Lower yesterday. Today we have a bit more news, but I think everyone is waiting to see what the folks in DC will do relative to a budget and avoiding a government shutdown. It seems that this is the first year where no real budget for the fiscal year was ever finalizes. All we've been doing is extending capital so as not to shut down and it seems that this is the way this year for the folks in DC. Will we get a finalizes budget such that this doesn't become an issue again later this year? As in all things, only time will tell. It was reported yesterday evening that a stop gap measure was put into place that would fund the government until Friday, March 8th or the 22nd. This is not a full year budget, only a temporary fix.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

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.