NEW YORK ( TheStreet) -- The week leading up to Friday's nonfarm payrolls report was expected to be volatile; it has yet to dissapoint. Monday saw a weaker-than-expected Institute for Supply Management manufacturing reading, which pushed the U.S. dollar lower and stocks higher. The premise was that the weaker data would keep the Fed in the easing game longer. With markets acting even more irrational than ever, it takes a lot of intermarket analysis to make sense of it all.
Equities have pushed higher on a nominal front, but have fallen relative to gold. Since inflation is not a concern, as seen in my article on Monday (
Global Macro: The Importance of This Week's Employment Data), gold must be catching a bid from risk-averse investors.
The pair shot higher at the end of 2012, a testament to the lack of concern about volatility. This period also saw a fall in the VIX, an options volatility measure. This pair should continue to push lower leading into Friday, and break strongly lower if the market doesnt't like what it sees.The next pair is of Barclays 1-3 Year Treasury Bond Fund (SHY) over Barclays 20 Year Treasury Bond Fund (TLT). The pair measures the Treasuries yield curve. The curve correlates strongly to equities. The chart below shows that yield curve price action has hit a resistance point leading into Friday's economic release. Heightened volatility will keep this resistance point strong. A release that goes against investors' expectations will push this pair lower, and although yields on both assets will rise, longer-term Treasuries will rise faster. The last pair looks at DB USD Index Bullish (UUP) over CurrencyShares Japanese Yen Trust (FXY). This pair measures volatility from global markets and commodities. Gold and oil have seen heightened volatility in their trading, as well as commodity-linked currencies. The yen caught a bid as investors have pulled out of the Nikkei and U.S. equities. The fear returning to the market and general selling of U.S. dollars have pushed this pair lower, signaling yen strength. The yen should continue to show strength during this time of uncertainty and weigh on global currencies. At the time of publication the author had no position in any of the stocks mentioned. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.