Tariff talks drive markets lower

USD: Mar '25 is Up at 107.315.  

Energies: Apr '25 Crude is Down at 69.48.

Financials: The Mar '25 30 Year T-Bond is Higher by 11 ticks and trading at 117.17.

Indices: The Mar '25 S&P 500 emini ES contract is 81 ticks Higher and trading at 5996.25.

Gold: The Feb'25 Gold contract is trading Down at 2872.60.

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 Higher and Crude is trading Lower which is correlated. Gold is trading Lower which is 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 Aussie and Hang Seng exchanges.  All of Europe is trading Lower with the exception of the London exchange.

Possible challenges to traders

• Core PCE Price Index m/m is 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 EST.  This is Major.

• Prelim Wholesale Inventories m/m is out at 8:30 AM EST.  This is Major.

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

• FOMC Member Goolsbee Speaks at 10:45 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 as the Unemployment Claims were reported.  The Dow moved Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8 AM EST 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 a dozen plus ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is now Jun '25 and the Dow is still Mar '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Jun 2025 - 2/27/25

Dow - Mar 2025- 2/27/25

Bias

Yesterday we gave the markets an Upside bias as the Bonds and Gold were trading Lower Thursday AM and that usually represents an Upside bias.  All indices fell on Thursday.  The Dow dropped 194 points, and the other indices lost ground as well. 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

So, yesterday with continued talks of tariffs and layoffs for government workers the markets dropped with all the indices trading in negative territory.  Today we should get some news on Ukraine as their president will be visiting.  Will this be enough to propel the markets forward?  As in all things, only time will tell.