The markets didn't disappoint

USD: Mar '25 is Up at 107.910.

Energies: Feb '25 Crude is Up at 69.68.

Financials: The Mar '25 30 Year T-Bond is Down 3 ticks and trading at 113.15.

Indices: The Mar '25 S&P 500 emini ES contract is 25 ticks Higher and trading at 6042.25.

Gold: The Feb'25 Gold contract is trading Up at 2629.00.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not normal, but 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 Higher and Crude is trading Lower 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. Asia traded mainly Higher with the exception of the Sensex and Nikkei exchanges.  Europe is trading mainly Higher except the Dax and Milan exchanges. 

Possible challenges to traders

• Richmond Manufacturing Index is out at 10 AM EST. This is Major.

• Lack of Major Economic News.

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 7:30 AM EST with no news in sight.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:30AM 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 ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is now Mar '25 and the Dow is now 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 -Mar 2025 - 12/23/24

Dow - Mar 2025- 12/23/24

Bias

Yesterday we gave the markets an Upside bias and the markets didn't disappoint. The Dow gained 67 points on the session and the other indices gained ground as well. Given that we are on the cusp of the Christmas Holiday our bias is Neutral or Mixed as the markets could go anywhere today. Today is an abbreviated session as the markets will close at 1 PM EST and will remain closed tomorrow. We will resume our edition on Thursday, December 26th.

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

Commentary

So, Yesterday was an interesting day as the markets welcomed a non-shutdown.  The indices all closed to the Upside as crude, the bonds and gold all traded Lower Monday morning and that usually reflected an Upside Day.  The markets didn't disappoint. We want to wish all of you viewers a safe and happy holiday season. We will be back on Thursday the 26th.