Markets take a dip

USD: Jun '25 is Down at 99.440.  

Energies: Jun '25 Crude is Up at 62.57.

Financials: The Jun '25 30 Year T-Bond is Lower by 28 ticks and trading at 111.22.

Indices: The Jun '25 S&P 500 emini ES contract is 164 ticks Lower and trading at 5919.00.

Gold: The Jun'25 Gold contract is trading Up at 3313.10.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, and the 30 Year T-Bond is trading Lower.  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 Lower and Crude is trading Higher 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 traded Higher with the exception of the Sensex exchange which is Lower.  All of Europe is trading Higher.

Possible challenges to traders

• Crude Oil Inventories are out at 10:30 AM EST.  This is Major.
• FOMC Member Barkin Speaks at 12:15 PM EST. This is Major.
• FOMC Member Bowman Speaks at 12:15 PM EST.  This is Major.

Traders, please note that we've changed the Bond instrument from the 10 Year (ZN) to the 2 Year (ZT).  They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract.  The YM contract is the Dow Jones Industrial Average, 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 ZT climbed Higher at around 8 AM EST with no news pending.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8 AM EST and the ZT charged Higher at around the same time.  These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better.  This represented a Long opportunity on the 2-year note, as a trader you could have netted 20 plus ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Jun '25 and the Dow is Jun '25 as well.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Jun 2025 - 5/20/25

Dow - Jun 2025- 5/20/25

Bias

Yesterday we gave the markets a Neutral or Mixed bias meaning the markets could go in any direction.  The markets veered to the Downside yesterday as the Dow dropped 115 points and the other indices lost ground as well.  Today we aren't dealing with a correlated market and our bias is Neutral or Mixed.

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

Commentary

It would seem that the traders wanted to take money off the table yesterday after all the Up days that the markets have seen as of late. Will this continue?