PPI numbers will give some insight as to what the future Fed action may be

USD: Dec '23 is Down at 105.520.

Energies: Nov '23 Crude is Down at 85.33.

Financials: The Dec '23 30 Year T-Bond is Up 50 ticks and trading at 113.16.

Indices: The Dec '23 S&P 500 emini ES contract is 36 ticks Higher and trading at 4400.50. 

Gold: The Dec'23 Gold contract is trading Up at 1884.00.  

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Down which is not normal, but 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 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.  All of Asia is traded Higher with the exception of the Singapore exchange.  Europe is trading Higher with the exception of the Paris and the Spanish IBEX exchanges.

Possible challenges to traders

• Core PPI m/m is out at 8:30 AM EST. This is Major.

• PPI m/m is out at 8:30 AM EST. This is Major.

• FOMC Member Waller Speaks at 10:15 AM EST. This is Major.

• 10-y Bond Auction starts at 1 PM EST. This is Major.

• FOMC Meeting Minutes is out at 2 PM EST. This is Major.

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.  

We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) 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 likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZN migrated Higher at around 7:40 AM EST as the S&P hit a High at around the same time. If you look at the charts below the S&P gave a signal at around 7:40 AM and the ZN started its Upward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 7:40 AM and migrated Lower. 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 10-year note, as a trader you could have netted about a dozen ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '23. The S&P contract is now Dec' 23. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.  

Charts courtesy of MultiCharts built on an AMP platform

ZN - Dec 2023 - 10/10/23

S&P - Dec 2023 - 10/10/23

Bias

Yesterday we gave the markets an Upside bias as it was correlated to go Higher, and it did. The Dow gained 135 points and the other indices traded Higher as well.  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

Well, it seems as though the markets weren't finished going to the Upside as all the indices traded Higher yesterday. This seems to fall in line with what we mentioned yesterday concerning patriotic rallies. The markets were intent to trade Higher yesterday, and they did. They were certainly correlated to trade Higher. Today we have PPI numbers out at 8:30 AM and these are always major. This report will also give some insight as to what the future Fed action may be. There's already talk that interest rates may be dropped to avert an economic calamity due to the Israel-Hamas war. But as in all things only time will tell because right now, it's pure speculation.