US Dollar: Sept USD Down at 93.015.
Energies: Sept’20 Crude is Down at 42.00.
Financials: The Sept’20 30 year bond is Up 5 ticks and trading at 178.00
Indices: The Sept S&P 500 emini ES contract is 50 ticks Higher and trading at 3374.00.
Gold: The Aug’20 Gold contract is trading Up at 1960.80 Gold is 110 ticks Higher than its close.
This is not a correlated market. The dollar is Down- and Crude is Down- which is not normal but the 30 year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower then 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 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.
At this time Asia is trading Mixed with half the exchanges Higher and the other half Lower. Currently Europe is trading Mixed as well.
Possible Challenges To Traders Today:
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Empire State Manufacturing Index is out at 8:30 AM EST. This is Major.
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NAHB Housing Market Index is out at 10 AM EST. This is Major.
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Mortgage Delinquencies – tentative. This is Major.
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TIC Long-Term Purchases is out at 4 PM EST. Major.
Treasuries
We’ve elected to switch gears a bit and show correlation between the 30 year bond (ZB) 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 liken to a seesaw, when up goes up the other should go down and vice versa.
On Friday the ZB made it’s move at around 8 AM EST. The ZB hit a Low at around that time and the S&P moved Lower. If you look at the charts below ZB gave a signal at around 8 AM EST and the S&P moved Lower at around the same time. Look at the charts below and you’ll see a pattern for both assets. ZB hit a Low at around 8 AM EST and the S&P was moving Lower shortly thereafter. 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 30 year bond, as a trader you could have netted about 20 ticks per contract on this trade. Each tick is worth $31.25. Please note: the front month for the ZB is now Sept ’20. The S&P contract has been changed to Sept ’20. I’ve changed the format to Renko bars such that it may be more apparent and visible.
Charts Courtesy of MultiCharts built on an AMP platform
ZB – Sept 2020 – 8/14/20
S&P – Sept 2020 – 8/14/20
Bias
On Friday we gave the markets a Downside bias as the USD and Bonds were both trading Higher and this usually reflects a Downside day. The S&P and Nasdaq both traded Lower, the Dow closed Higher by 34 points. Today we aren’t dealing with a correlated market and our bias is Neutral.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
So Friday we had a virtual news tsunami in that we had (just for the US Markets) 9 economic reports, all of which were major. Retail Sales fell short of expectation and no doubt this had an effect on Friday’s session. Today we have Empire State Manufacturing Index and NAHB Housing Market Index both of which are major and proven market movers. Will this help to give the markets more direction? As in all things, time will tell.
Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.
There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.
In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.