GOP blocks debt ceiling [Video]
US Dollars: December 21 USD is up to 93.805.
Energies: On November 21, crude was down to 74.65.
Financial: The 30-year December 21 bond is up 14 ticks and is trading at 159.24.
Indices: The December 21 S&P 500 emini ES contract is 112 ticks higher and is trading at 4372.00.
Gold: The Dec’21 Gold contract is trading at 1743.00. Gold is 55 ticks higher than its close.
It is not a correlated market. The dollar is rising and crude is falling, which is normal and the 30-year bond is trading higher. Financial stocks should always correlate with the US dollar so that if the dollar is lower bonds should follow and vice versa. The S&P is higher and the crude is trading lower, which is correlated. Gold is trading higher, which is not correlated with the rise in the US dollar. I tend to believe that gold has an inverse relationship with the US dollar because when the US dollar is falling gold tends to rise in value and vice versa. Think of it as a swing, when one is at the top the other should be at the bottom. I am pointing this out to you to make you realize that when we don’t have a correlated market, that means something is wrong. As traders you need to be aware of this and continue with your eyes wide open. Currently, Asia is trading lower, with the exception of the higher Hang Seng exchange. All of Europe is trading higher right now.
Possible challenges for traders today
Pending door-to-door sales are at 10 a.m. EST. It’s Major.
Crude oil inventories are released at 10:30 a.m. EST. It’s Major.
Fed Chairman Powell speaks at 11:45 a.m. EST. It’s Major.
Bostic, a member of the FOMC, spoke at 2:00 p.m. EST. It’s Major.
Traders, please note that we have changed the 30 year bond instrument (ZB) to 10 year (ZN). They work exactly the same way.
We chose to change gears a bit and show a correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is Standard and Poor’s and the aim is to show an inverse correlation between the two instruments. Remember it’s like a swing, when the climb goes up, the other has to go down and vice versa.
Yesterday, the ZN moved around 10:00 a.m. EST. ZN hit a low around this time and the S&P fell. If you look at the charts below, ZN gave a signal around 10:00 am EST and the S&P moved lower around the same time. Look at the charts below and you will see a trend for both assets. ZN bottomed around 10:00 a.m. EST and S&P declined shortly thereafter. These charts represent the most recent version of MultiCharts and I have changed the timeframe to a 15 minute chart for better viewing. This represented a long opportunity on the 10 year note, as a trader you could have earned around 20+ ticks per contract on this trade. Each tick is worth $ 15.625. Note: ZN’s first month is now December 21. The S&P contract is now also valid on December 21. I changed the format to Renko bars so that it is more noticeable and visible.
Graphics courtesy of MultiCharts built on an AMP platform
ZN – Dec. 2021 – 09/28/21
S&P – Dec. 2021 – 09/28/21
Yesterday we gave the markets a neutral bias as we didn’t see much of a clear correlation on Tuesday morning. The Dow Jones closed 569 points lower and the other indices also traded lower. Today, we are not dealing with a correlated market and our bias is Neutral.
Could this change? Sure. Remember that anything can happen in a volatile market.
On Monday night, we found out that the DC GOP decided to block a bill to raise the US government’s debt ceiling so the US can avoid an October shutdown. If that happened, it would be the first time in American history that the United States could default on its loans and that borrowing would be halted. It would also mean that government employees would be put on leave and the government would be behind on Social Security payments. This would in effect ruin the stellar reputation that the United States has enjoyed for over two centuries. For those who might be wondering why I’ve been pestering government themes lately; this is because the actions in DC affect the financial markets. Do you want proof ? Look what happened yesterday. Enough said.