(Nick Mastrandrea – Market Tea Leaves)
US Dollar: Sep ’22 USD is Down at 106.670.
Energies: Aug ’22 Crude is Up at 99.29.
Financials: The Sep ’22 30 Year bond is Down 27 ticks and trading at 138.30.
Indices: The Sep ’22 S&P 500 emini ES contract is 48 ticks Higher and trading at 3860.25.
Gold: The Aug’22 Gold contract is trading Up at 1743.30. Gold is 38 ticks Higher than its close.
This is nearly a correlated market. The dollar is Down, and Crude is Up which is normal, and the 30-year 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. All of Asia is trading Higher. Currently all of Europe is trading Higher as well.
Possible challenges to traders today
- Challenger Job Cuts at 7:30 AM EST. Major.
- Unemployment Claims is out at 8:30 AM EST. Major.
- Trade Balance is out at 8:30 AM EST. Major.
- Natural Gas Storage is out at 10:30 AM EST. Major.
- FOMC Member Bullard Speaks at 1 PM EST. Major.
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 made its move at around 2 PM EST. The ZN hit a High at around that time and the S&P moved Higher shortly thereafter. If you look at the charts below ZN gave a signal at around 2 PM EST and the S&P moved Lower at around the same time. Look at the charts below and you’ll see a pattern for both assets. ZN hit a High at around 2 PM EST and the S&P was moving Higher shortly thereafter. 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 Shorting 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 the ZN is now Sep ’22. The S&P contract is also Sep’ 22 as well. The front months are now Sep’ 22. I’ve changed the format to Heikin-Ashi such that it may be more apparent and visible.
Charts Courtesy of MultiCharts built on an AMP platform
Yesterday we gave the markets a Neutral bias which means the markets could go anywhere. Yesterday it veered to the Upside as the Dow traded 70 points Higher and the other indices traded Higher as well. Today we are dealing with a nearly correlated market and our bias is to the Upside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Yesterday we suggested a Neutral or Mixed bias which means the markets could go anywhere and often does. Yesterday it chose the Upside as the indices finished in positive territory. The Bonds made its move at 2 PM to coincide with release of the Fed Meeting Minutes from their last meeting. Today we have Challenger Job Cuts, Trade Balance and Unemployment Claims; all of which are major.