Upside bias – An upside day

USD: Dec '24 is Up at 105.775.

Energies: Dec '24 Crude is Up at 68.21.

Financials: The Dec '24 30 Year T-Bond is Down 7 ticks and trading at 117.14.

Indices: The Dec '24 S&P 500 emini ES contract is 27 ticks Lower and trading at 6025.00

Gold: The Dec'24 Gold contract is trading Down at 2608.30.

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 Lower and Crude is trading Higher 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. All of Asia traded Lower.  All of Europe is trading Lower as well. 

Possible challenges to traders

• NFIB Small Business Index is out at 6 AM EST.  This is Major.

• Cleveland Fed Inflation Expectations is tentative.  This is Major.

• FOMC Member Waller speaks at 10 AM EST.  This is Major.

• RCM/TIPP Economic Optimism is tentative.  This is Major.

• FOMC Member Barkin Speaks at 10:15 EST.  This is Major.

• FOMC Member Kashkari Speaks at 2:15 PM EST.  This is Major.

• Loan Officer Survey is tentative.  This is Major.

• FOMC Member Harker Speaks at 5 PM EST.  This is not Major.

• FOMC Member Barkin Speaks at 5:30 PM EST.  This is not 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 dived Lower at around 8:30 AM EST with no economic news reported at that time.  The Dow leapt Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:30 AM and the ZT moved Lower 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 Short 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 Dec and the Dow is now Dec '24.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of Barcharts

ZT -Dec 2024 - 11/11/24

Dow - Dec 2024- 11/11/24

Bias

Yesterday we gave the markets an Upside bias and the markets didn't disappoint.  The Dow closed Higher by 304 points and the other indices closed Higher as well.  Today we aren't dealing with a correlated market, and our bias is to the Downside.

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

Commentary

So yesterday despite it being a federal holiday, the markets still migrated to the Upside.  We suggested that because our rules of Market Correlation told us that.  The markets didn't disappoint as all indices traded Higher yesterday.  Today we more economic news so we'll have to see if post-holiday the markets will continue to trend Higher.  But as in all things, only time will tell if it will...