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 Higher and Crude is trading Lower which is correlated. Gold is trading Higher 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. All of Asia is trading Lower with the exception of the Shanhai exchange which is Higher. Currently all of Europe is trading Higher with the exception of the London and Spanish IBEX exchanges.

Possible challenges to traders

Core Retail Sales m/m is out at 8:30 AM EST. This is Major.
Retail Sales is out at 8:30 AM EST. This is Major.
Wholesale Sales m/m is out at 8:30 AM EST. This is Major.
Empire State Manufacturing Index is out at 8:30 AM EST. This is Major.
FOMC Member Williams Speaks at 8:30 AM EST. This is Major.
Business Inventories m/m are out at 10 AM EST. This is Major.
NAHB Housing Market Index is out at 10 AM 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.

On Friday the ZN migrated Higher at around 8:30 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 8:30 AM and the ZN started its Upward climb. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 8:30 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 20 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for both the ZN and the S&P are now Jun '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 -Jun 2024 - 04/12/24

S&P - Jun 2024 - 04/12/24

Bias

On Friday we gave the markets a Neutral or Mixed bias. The markets had other ideas and dropped dramatically. The Dow lost 476 points and the other indices lost ground as well. Today we aren't dealing with a correlated market and our bias is to the Upside.

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

Commentary

The markets this past week has been making dramatic moves either Up or Down. This shows a market that lacks stability and is inclined to move in either direction (up or down) based upon the slightest whim in the financial markets. Today we have Retail Sales which is always a major market mover and certainly something the Federal Reserve will review when it comes down to rate decisions. And let's not forget, today is Tax Day. Over the weekend Iran attacked Israel with hundreds of drone missiles which didn't do much damage as most were intercepted in the air. Surprisingly enough crude oil has remained stable as Israel has not counter attacked as of yet. Time will tell how this all plays out.

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.