USD: December 24 is up at 105.225.

Energies: Dec 24 crude is down at 70.82.

Financial data: The December 24 30-year T-Bond is down 89 ticks and trading at 115.12.

Clues: The December 24 S&P 500 emini ES contract is 508 ticks higher and trading at 5939.00.

Gold: December 24 Gold the contract is trading lower at 2707.40.

Initial conclusion

This is an almost correlated market. USD is up and crude is down, which is normal, but the 30-year T-Bond is trading lower. Financial values ​​should always correlate with the US dollar, so 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 lower, which correlates with the rise in the US dollar. I tend to believe that gold has an inverse relationship with the US dollar, as when the US Dollar is falling, gold tends to increase in value and vice versa. Think of it as a seesaw: when one is up, the other should be down. I’m pointing this out to you to make you aware that when you don’t have a correlated market, something is wrong. As traders, you need to be aware of this and proceed with your eyes wide open. Asia negotiated in a mixed manner. All of Europe is trading mostly higher, with the exception of the Milan and Spanish Ibex exchanges.

Possible challenges for traders

Traders, please note that we have changed the bond instrument from 10 years (ZN) to 2 years (ZT). They work exactly the same way.

We chose to change the subject a little and show correlation between 2-year Treasury (ZT) bonds and the S&P futures contract. The YM contract is the Dow Jones Industrial Average and its objective is to show an inverse correlation between the two instruments. Remember, it’s like a seesaw: when the top goes up, the other should go down and vice versa.

Yesterday, the ZT surged higher around 8:30 a.m. EST when the trade balance numbers were released. The Dow plunged lower at the same time. Look at the charts below and you will see a trend for both assets. The Dow rose at 8:30 a.m. and the ZT fell around the same time. These charts represent the latest version of the bar charts and I have changed the time frame to a 15 minute chart for better display. This represented a long opportunity on the 2-year note, as a trader you could have earned about a dozen ticks per contract on this trade. Each tick is worth $7.625. Please note: The first month for ZT is December and the Dow is now December 24th. I changed the format to filled (not hollow) candlesticks so that they are more apparent and visible.

Charts courtesy of Barcharts

ZT -Dec 2024 – 05/11/24

Dow – December 2024 – 05/11/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias; which means markets can go anywhere, and often do. Markets moved higher yesterday, with the Dow Jones gaining 427 points and other indexes also gaining ground. Today we are dealing with an almost correlated market and our bias is upward.

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

Comment

As I write this, the presidential election is still ongoing and will not be decided for hours, if not days. Many mail-in ballots will need to be counted, not to mention ballots from overseas or even from military personnel serving overseas. This may not please the GOP because they want everything today, but unfortunately it doesn’t work that way. As of this writing, the winner of this election has not yet been announced. Please note that the election was decided in favor of Trump. President-elect Trump won with 277 votes to Kamels Harris’ 224.