Fed says no to rate cuts

USD: Mar '25 is Up at 107.925.

Energies: Mar '25 Crude is Down at 72.54.

Financials: The Mar '25 30 Year T-Bond is Up 24 ticks and trading at 114.27.

Indices: The Mar '25 S&P 500 emini ES contract is 48 ticks Higher and trading at 6079.50.

Gold: The Feb'25 Gold contract is trading Up at 2819.30.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Down which is normal, and the 30 Year T-Bond is trading Higher.  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 Lower which is correlated. Gold is trading Higher which is not 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. Asia traded Mainly Higher with the exception of the Shanghai exchange which is fractionally Lower.  All of Europe is trading Higher. 

Possible challenges to traders

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

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

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

• Pending Home Sales is out at 10 AM EST. This is Major.

• Natural Gas Storage is out at 10:30 AM EST. This is Major.

Traders, please note that we've changed the Bond instrument from the 10 year (ZN) to the 2 year (ZT). They work exactly the same.  

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract.  The YM contract is the Dow Jones Industrial Average, 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 ZT dived Lower at around 8 AM EST with no economic news in sight.  The Dow moved Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8 AM EST and the ZT moved Lower at around the same time.  These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better.  This represented a Short opportunity on the 2-year note, as a trader you could have netted about 20 ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is now Mar '25 and the Dow is now Mar '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Mar 2025 - 1/29/25

Dow - Mar 2025- 1/29/25

Bias

Yesterday we gave the markets a Neutral or Mixed bias as it was FOMC Day, and we always maintain a Neutral bias on that day. Given that the Federal Reserve choose not to reduce interest rates, the markets lost ground. The Dow dropped 137 points, and the other indices lost ground as well. Today we aren't dealing with a correlated market and our bias is Neutral or Mixed as we don't see much in the way of correlation.

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

Commentary

Yesterday we did not make a call on what the Federal Reserve would do as this was the first FOMC meeting in the new Trump Administration. The Fed choose to sit on their hands and no nothing, neither raising nor lowering rates. We kind of thought they might do this. The Fed Chief openly defied President Trump as he was hell bent on a rate reduction, but that didn't happen. The Fed Chief doesn't report to the President and never has.  He reports to Congress. Want to learn Market Correlation and determine market direction hours before the Opening Bell?