This is not a correlated market. The USD is Down, Crude is Up which is 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 Higher which is not correlated. Gold is trading Lower which is not 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 all of Asia is trading Lower. Europe is also trading Lower as well.

Possible challenges to traders today

Challenger Job Cuts y/y is out at 7:30 AM EST. This is Major.
ADP Non-Farm Employment Change is out at 8:15 AM EST. This is Major.
Unemployment Claims are out at 8:30 AM EST. This is Major.
Revised Nonfarm Productivity q/q is out at 8:30 AM EST. This is not Major.
Revised Unit Labor Costs q/q is out at 8:30 AM EST. This is not Major.
Final Manufacturing PMI is out at 9:45 AM EST. This is Major.
ISM Manufacturing PMI is out at 10 AM EST. This is Major.
ISM Manufacturing Prices is out at 10 AM EST. This is Major.
Construction Spending m/m is out at 10 AM EST. This is Major.
Wards Total Vehicle Sales - All Day by Brand. Major.
Natural Gas Storage is out at 10:30 AM EST. This is Major.
Crude Oil Inventories are out at 11 AM EST. This is Major.
FOMC Member Harker Speaks at 1 PM 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.

Yesterday the ZN migrated Higher at around 10:15 AM EST as the S&P hit a High at around the same time. If you look at the charts below the ZN gave a signal at around 10:15 AM and the ZN continued its Upward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 10:15 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 plus 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 - 5/31/23

S&P - Jun 2023 - 5/31/23

Bias

Yesterday we gave the markets a Downside bias as both the USD and Crude were trading Higher Wednesday morning and that usually reflects a Downside Day. The indices didn't disappoint as the Dow closed 135 points Lower 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 folks in DC are still duking it out on the Debt Ceiling compromise and some factions of both parties aren't happy with the agreement. Some of the extreme Right are intent on default and some folks on the Left aren't keen on the work requirements for the Food Stamp program. The good news here is it doesn't appear as though Medicare and Social Security are being touched which is good news for seniors. After all they only spent their entire working lives paying into the system. This compromise will be voted on Wednesday evening so come Thursday we may have a positive surprise. Mind you that if it passes the House, it must still go to the Senate before it hits Joe Biden's desk. As an Update to this, the House has passed the Debt Ceiling accord which will now be sent to the Senate for approval.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD climbs to two-week highs beyond 1.1900

EUR/USD is keeping its foot on the gas at the start of the week, reclaiming the 1.1900 barrier and above on Monday. The US Dollar remains on the back foot, with traders reluctant to step in ahead of Wednesday’s key January jobs report, allowing the pair to extend its upward grind for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold treads water around $5,000

Gold is trading in an inconclusive fashion around the key $5,000 mark on Monday week. Support is coming from fresh signs of further buying from the PBoC, while expectations that the Fed could turn more dovish, alongside concerns over its independence, keep the demand for the precious metal running.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.