Energies: Nov ’22 Crude is down at 81.75.
Financial: The December ’22 30-year bond is down 14 ticks and is trading at 127.26.
Indexes: The December ’22 S&P 500 emini ES contract is 126 ticks lower and is trading at 3750.50.
Gold: The December 22 gold contract is trading down at 1664.00. Gold is 171 ticks lower than its closing price.
This is not a correlated market. The dollar is up and crude is down, which is normal, and the 30-year bond is trading lower. The financials should always correlate with the US dollar in such a way that if the dollar is lower, the bonds should follow and vice versa. The S&P is lower and crude oil is trading lower, which is uncorrelated. 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 because when the US dollar falls, gold tends to increase in value and vice versa. Think of it as a seesaw, if one is up, the other should be down. I’m pointing this out to make you aware that if we don’t have a correlated market, it means something is wrong. As traders, you should be aware of this and go with your eyes wide open. All of Asia is currently trading lower. All of Europe is also trading lower.
Potential Challenges for Traders Today
- Flash Services PMI will be released at 9:45 a.m. EST. This is Major.
- Flash Manufacturing PMI will be released at 9:45 a.m. EST. Important.
- Fed Chairman Powell will speak at 2 p.m. EST. This is Major.
Traders, please note that we have changed the bond instrument from 30 years (ZB) to 10 years (ZN). They work exactly the same.
We chose to shift gears a bit and show a correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor’s and its purpose is to demonstrate an inverse correlation between the two instruments. Remember it is likened to a seesaw, when going up the other has to go down and vice versa.