Tariff fears return

USD: Sept '25 is Down at 98.425.  

Energies: Aug '25 Crude is Up at 66.29.

Financials: The Sep '25 30 Year T-Bond is Lower by 19 ticks and trading at 115.17.

Indices: The Sep '25 S&P 500 emini ES contract is 44 ticks Higher and trading at 6336.25.

Gold: The Aug'25 Gold contract is trading Down at 3415.40.

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 Higher and Crude is trading Higher which is not correlated. Gold is trading Lower which is not 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. Asia traded Higher with the exception of the Indian exchange.  Currently all Europe is trading Higher.

Possible challenges to traders

• Crude Oil Inventories is out at 10:30 AM EST. This is Major.
• 10 Year Bond Auction Starts at 1 PM EST. This is Major.
• FOMC Member Collins Speaks at 2 PM EST. This is Major.
• FOMC Member Cook Speaks at 2 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 dived Lower at around 9 AM EST with no real economic news pending.  The Dow climbed Higher at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow climbed Higher at around 9 AM EST and the ZT dived Lower 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 Short 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 Sep '25 and the Dow is now Sep '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Sep 25 - 8/05/25

Dow - Sep 2025- 8/05/25

Bias

Yesterday we gave the markets an Upside bias, but the markets had other ideas.  The Dow dropped 62 points, and the other indices lost ground as well.  Today we aren't dealing with a correlated market, and our bias is to the Upside.

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

Commentary

It would appear as though the tariff fears have returned.  After a short-lived stellar day on Monday, the fear of tariffs and inflation have returned.  The markets are not enthused with a gain in tariffs if it means inflation and a possible recession.