This is not a correlated market. The dollar is Down, and 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 lower, 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 Higher which is 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. Currently all of Asia is trading Lower with the exception of the Sensex and Singapore exchanges. All of Europe is trading Higher. .

Possible challenges to traders today

NAHB Housing Market Index is out at 10 AM EST. Major.
Lack of Majo Economic News.

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 hit a Low at around 9:50 AM EST. The S&P was in a downswing at around the same time. If you look at the charts below ZN gave a signal at around 9:50 AM and the S&P gave a signal at around the same time. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 9:50 AM and continued its Downward trend. 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 30 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar '23. The S&P contract is still Dec' 22. I've changed the format to Renko Bars such that it may be more apparent and visible.

Charts courtesy of MultiCharts built on an AMP platform

ZN - Mar 2023 - 12/16/22

S&P - Dec 2022 - 12/16/22

Bias

On Friday we gave the markets a Neutral bias as we didn't see much in the way of correlation Friday morning. The markets continued its downward trend as the Dow dropped 282 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

Last Friday morning when we viewed the markets, we kind of assumed that we might see a dead cat bounce as the markets had dropped dramatically Thursday. No such luck. The markets continued its downward spiral as the Dow dropped 282 points and the other dropped as well. We think the market are more afraid of the potential of a looming recession. Why? Well, the Fed insinuated as much Wednesday when they conducted their press conference basically stating that the Overnight Rate would rise to 5,25% and that unemployment and layoffs would occur. This does not bode well for an Upside market hence the indices dropped Friday, and we don't see the prospect of a Santa Claus rally this year. Could this change?? Of course, anything is possible in a volatile market.

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.