Oil and stock prices moved in tandem this year, a rare coupling that highlights fears about global economic growth
The Correlation of WTI crude oil and S&P500 index is at 26 years high. In Jan 2016 the correlation between S&P500 and WTI index is at 0.89, higher than any calendar month since 1990.
Historically oil and stocks are higher correlated during recession. During 2008 financial crisis correlation spiked above 0.80.
Investors are too much concerned about cheap oil as falling oil prices signal weakness in demand which foretells economic slowdown.
The countries like Russia and Brazil are mostly affected due to weak oil prices. These countries economy rely on oil exports. So chance of EM debt crisis can happen due to slump in oil prices.
So stock market prices is mostly dependent on oil price movement this quarter .Technically US Oil (WTI) is facing strong resistance around $33 and any break above $33 will take the crude till $35.89 (55 day EMA) .If US oil (WTI) breaks above $33 then chance of S&P500 to trade higher is more and it can reach till 1980 level.
Kommentare
Kevin_Lomax
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Nice post, very interesting.
coolingla
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Makes sense.
Oil has another 2 weeks' momentum I believe. We should closely watch Oil and SPX' price actions around 2/15. If Oil can't break the strong resistance around $38, it's likely gonna fall hard all the way to $25. And that will definitely scare the whole market.