Downside bias – Mixed market [Video]

US Dollar: Mar ’23 USD is Up at 101.515.

Energies: Feb ’23 Crude is Up at 80.58.

Financials: The Mar ’23 30 Year T-Bond is Down 5 ticks and trading at 130.21.

Indices: The Mar ’23 S&P 500 Emini ES contract is 41 ticks Higher and trading at 4042.25.

Gold: The Feb’23 Gold contract is trading Down at 1936.00. Gold is 66 ticks Lower than its close.

Initial conclusion

This is not a correlated market. The dollar 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 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 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. Currently Asia is trading Mixed. All of Europe however is trading Higher at the present time. .

Possible challenges to traders today

• Advance GDP is out at 8:30 AM EST. This is Major.

• Advance GDP Price Index is out at 8:30 AM EST. Major.

• Durable Goods Orders is out at 8:30 AM EST. Major.

• Core Durable Goods Orders is out at 8:30 AM EST. Major.

• Unemployment Claims are out at 8:30 AM EST. Major.

• Goods Trade Balance is out at 8:30 AM EST. Major.

• Prelim Wholesale Inventories is out at 8:30 AM EST. Major.

• New Home Sales is out at 8:30 AM EST. Major.

• Natural Gas Storage is out at 10:30 AM EST. 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 hit a Low at around 9:45 AM EST. The S&P was trading Lower at around the same time. If you look at the charts below ZN gave a signal at around 9:45 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. ZN hit a Low at around 9:45 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 Long 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 ’23. The S&P contract is now Mar’ 23 as well. 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 2023 – 1/25/23

S&P – Mar 2023 – 1/25/23

Bias

Yesterday we gave the markets a Downside bias as the Bonds and USD were trading Higher and this usually represents a Down day. The markets closed Mixed with only the Dow showing any gain. The Dow gained about 10 points however this occurred withing the final seconds of trading, the bulk of the session the Dow was in negative territory. The S&P and Nasdaq both traded Lower. Today we aren’t dealing with a correlated market and our bias is Neutral or Mixed.

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

Commentary

Yesterday we gave the markets a Downside bias as both the Bonds and the USD were trading Higher Wednesday morning, and this usually reflects a Downside Day. The markets did trade Lower most of the session with the Dow gaining in the final seconds of trading. Today we have a virtual tsunami of economic news as we have 9 reports, all of which are major.