This is not a correlated market. The USD is Down, Crude is Up which is normal, but 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 Higher which is 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. At the present time Asia is trading mainly Higher with the exception of the Hang Seng and Indian Singapore exchanges which are trading Lower. All of Europe is trading Lower at the present time.

Possible challenges to traders today

Core PCE Price Index m/m is out at 8:30 AM EST. This is Major.
Core Durable Goods Orders m/m is out at 8:30 AM EST. This is Major.
Durable Goods Orders m/m are out at 8:30 AM EST. This is Major.
Goods Trade Balance is 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 m/m is out at 8:30 AM EST. This is Major.
Prelim Wholesale Inventories m/m is out at 8:30 AM. This is Major.
Revised UoM Consumer Sentiment is out at 10 AM EST. This is Not Major.
Revised UoM Inflation Expectations is out at 10 AM EST. This is not 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 Lower at around 10:15 PM EST as the S&P hit a Low at around the same time. If you look at the charts below the ZN gave a signal at around 10:15 PM and the ZN continued its Downward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a Low at around 10:15 PM and migrated Higher. 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 Short opportunity on the 10-year note, as a trader you could have netted about 20 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '23. The S&P contract is also Jun' 23. 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 - Jun 2023 - 5/25/23

S&P - Jun 2023 - 5/25/23

Bias

Yesterday we gave the markets an Upside bias as both the USD and the Bonds were trading Lower and that usually reflects an Up day. The markets traded Mixed as the Dow dropped 35 points but the other indices did trade to the Upside. 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

Still no resolution on the Debt Ceiling even though both Biden and McCartney have said that they're getting closer to an agreement. However there still is no agreement and we are less than a week away from June 1st when according to Secretary Yellen the US may default on its obligations and that is the first time in our history when something like that occurred. Today we have 9 economic reports, so we are saving it all before the Memorial Day weekend and on that note we wish all of you a safe and happy holiday. If you know of a veteran, give them thanks for their service. They have bought the peace that we enjoy.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD remains below 1.1850 after US data

EUR/USD struggles to gain traction and trades in a narrow range below 1.1850 on Wednesday. The US Dollar stays resilient against its rivals following the better-than-expected Durable Goods Orders and housing data, limiting the pair's upside ahead of FOMC Minutes.

GBP/USD stays in narrow channel above 1.3550 ahead of FOMC Minutes

GBP/USD holds its ground following Tuesday's slide and moves sideways above 1.3550 midweek. Although the data from the UK confirmed that inflation cooled in January, the positive shift seen in market mood helps the pair keep its footing as investors wait for the Fed to publish the minnutes of the January policy meeting.

Gold regains some shine, retargets $5,000 ahead of FOMC Minutes

Gold gathers fresh upside traction on Wednesday, leaving part of the weakness seen at the beginning of the week and refocusing its attention to the key $5,000 mark per troy ounce, all ahead of the release of the FOMC Minutes and despite the modest uptick in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Top 3 Price Prediction: Bitcoin, Ethereum, and Ripple face downside risk as bears regain control

Bitcoin, Ethereum, and Ripple remain under pressure on Wednesday, with the broader trend still sideways. BTC is edging below $68,000, nearing the lower consolidating boundary, while ETH and XRP also declined slightly, approaching their key supports.