By Areena FxUSD: Mar ’24 is Down at 100.850.
Energies: Feb ’24 Crude is Up at 72.07.
Financials: The Mar ’24 30 Year T-Bond is Down 19 ticks and trading at 124.17.
Indices: The Dec ’23 S&P 500 emini ES contract is 12 ticks Higher and trading at 4835.00.
Gold: The Feb’24 Gold contract is trading Down at 2076.50.
Initial conclusion
This is not a correlated market. The USD 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 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. Asia is trading Mixed. Currently all of Europe is trading Higher.
Possible challenges to traders
- Chicago PMI is out at 9:45 AM EST. This is Major.
- Lack of Major 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.
Yesterday the ZN migrated Lower at around 11:30 AM EST as the S&P hit a Low at around the same time. If you look at the charts below the S&P gave a signal at around 11:30 AM and the ZN started its Downward trend. Look at the charts below and you’ll see a pattern for both assets. S&P hit a Low at around 11:30 AM and migrated Higher.
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 Short opportunity on the 10-year note, as a trader you could have netted about a dozen ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Mar ’24. The S&P contract is now Mar’ 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 – Mar 2024 – 12/28/23
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S&P – Mar 2024 – 12/28/23
Bias
Yesterday we gave the markets an Upside bias as the USD and Bonds were both trading Lower and that usually represents and Upside Day. The markets didn’t disappoint with the Dow closing 54 points Higher and the S&P closed Higher as well, the Nasdaq dropped a paltry 4 points. All in all, it was pretty much an Up day. Today we aren’t dealing with a correlated market and our bias is Neutral.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Today is the last trading day for 2023. I hope this has been a prosperous year for all our readers and we trust more of the same for 2024. The only economic news we have today is Chicago PMI, out at 9:45 AM EST. We wish everyone a safe and Happy New Year. We will be back on Tuesday, January 2, 2024.