What comes down, must go up

USD: Mar '25 is Down at 108.185. However, Bitcoin is Up.

Energies: Mar '25 Crude is Up at 73.11.

Financials: The Mar '25 30 Year T-Bond is Lower by 14 ticks and trading at 114.31.

Indices: The Mar '25 S&P 500 emini ES contract is 72 ticks Lower and trading at 6070.75.

Gold: The Feb'25 Gold contract is trading Down at 2932.20.

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 Lower and Crude is trading Higher which is 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 traded Lower with the exception of the Nikkei exchange.  Europe is trading Higher with the exception of the Paris exchange. 

Possible challenges to traders

• NFIB Small Business Index is out at 6 AM EST.  This is Major.

• FOMC Member Hammack Speaks at 8:50 AM EST.  This is Major.

• FOMC Chair Powell Testifies at 10 AM EST.  This is Major.

• FOMC Member Bowman Speaks at 3:30 PM EST.  This is Major.

• FOMC Member Williams Speaks at 3:30 PM 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 Migrated Higher at around 8:30 AM EST with no economic news in sight.  The Dow moved Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM EST and the ZT moved Higher 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 Long opportunity on the 2-year note, as a trader you could have netted about a dozen 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 - 2/10/25

Dow - Mar 2025- 2/10/25

Bias

Yesterday we gave the markets a Neutral or Mixed bias as we saw no indication of Market Correlation Monday morning.  The markets veered to the Upside with the Dow gaining 167 points on the session and the other indices migrated Higher as well.  Today we aren't dealing with a correlated market, and our bias is to the Downside.

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

Commentary

Yesterday we witnessed a common occurrence that we see quite often in the markets and that is one day down, next day up or one day up, next day down.   This is typically the result of short covering such that you short the market on the way down but in order to exit the trade someone must buy.  When that buying becomes more voluminous then the markets reverse and go north.  Want to learn Market Correlation and determine market direction hours before the Opening Bell?