Correlation: WTI crude and S&P 500
- Thread starter m22au
- Start date
3 November 2010 update:
ES front month at 1194.50 or so
CL front month (December) at 84.96 or so
ES / CL ratio is therefore about 14.06
Airline stocks have laughed at me in the last month.
$XAL close on 2 November: 49.31
Commentary:
Oil above $84 has not hurt the stockmarket as a whole, nor the airline sector as a whole as yet.
In fact if anything, the performance of the airlines as a sector indicates that it will take oil prices of well over $90 to be a significant drag on the economy.
ES front month at 1194.50 or so
CL front month (December) at 84.96 or so
ES / CL ratio is therefore about 14.06
Airline stocks have laughed at me in the last month.
$XAL close on 2 November: 49.31
Commentary:
Oil above $84 has not hurt the stockmarket as a whole, nor the airline sector as a whole as yet.
In fact if anything, the performance of the airlines as a sector indicates that it will take oil prices of well over $90 to be a significant drag on the economy.
Bone,
Thank you for that objective measurement.
For what it's worth #1, I find it difficult to believe that the correlation will weaken significantly if ES or CL decline.
However if and when CL goes above $100 then I would expect the ES/CL ratio to decline below 14.00.
In other words, I see CL above $100 before ES goes above 1,400.
******
For what it's worth #2, since the start of September I think that the positive correlation between (EUR/USD) and S&P 500 has increased.
However I have not gone to the trouble of measuring this correlation by using R2 or any other objective measure.
For what it's worth #3, I believe that oil (as a 'consumable') has a closer / higher correlation with the S&P 500 than the (EUR/USD).
However gold (as a currency) has a closer / higher correlation with (EUR/USD) than the S&P 500.
" However gold (as a currency) has a closer / higher correlation with (EUR/USD) than the S&P 500. "
Actually, in the past two years the correlation between Gold and the Euro currency has fallen off the face of the earth. If you look at the settlement closing marks, for the past ten years the correlation is + 88%. But in the past two years, the correlation is actually - 6 %.
Actually, in the past two years the correlation between Gold and the Euro currency has fallen off the face of the earth. If you look at the settlement closing marks, for the past ten years the correlation is + 88%. But in the past two years, the correlation is actually - 6 %.
I won't dispute those figures, especially since the last two years covers periods (such as Nov 2008 to March 2009 and April 2010 to June 2010) of risk aversion.
I would assume that in periods of risk-seeking behaviour (such as September 2010 to present), that the correlation between EUR/USD and gold would be higher than it was in times of risk aversion (such as April 2010 to June 2010).
Wed 10 November 2010 update:
ES front month at 1213.50 or so
CL front month (December) at 87.80 or so
ES / CL ratio is therefore about 13.82
Airline stocks might be showing signs of discomfort at higher oil prices, but it's too early to tell.
$XAL close on 9 November: 48.77
Commentary:
Oil has reached a new 52-week high above $87.50.
It outperformed ES in the last week.
ES front month at 1213.50 or so
CL front month (December) at 87.80 or so
ES / CL ratio is therefore about 13.82
Airline stocks might be showing signs of discomfort at higher oil prices, but it's too early to tell.
$XAL close on 9 November: 48.77
Commentary:
Oil has reached a new 52-week high above $87.50.
It outperformed ES in the last week.
The following chart demonstrates the correlation between the S&P 500 and crude oil since mid 2009.
Although there are fluctuations in the $SPX:$WTIC ratio between 12.61 to 16.18 (and the range has tightened in 2010, now between 13.52 and 16.04), the 200 DMA has been flatlining between 14.00 and 14.50 since February 2010.
As it has been pointed out earlier in this thread, correlations can change. However while this correlation remains "in play", I maintain my view that any significant rally in equties (eg. +20% to above 1,400) would result in an oil price of over $100, which would hurt economic activity for both consumers and businesses.
Although there are fluctuations in the $SPX:$WTIC ratio between 12.61 to 16.18 (and the range has tightened in 2010, now between 13.52 and 16.04), the 200 DMA has been flatlining between 14.00 and 14.50 since February 2010.
As it has been pointed out earlier in this thread, correlations can change. However while this correlation remains "in play", I maintain my view that any significant rally in equties (eg. +20% to above 1,400) would result in an oil price of over $100, which would hurt economic activity for both consumers and businesses.
Friday 03 December update:
ES front month at 1218.00 or so
CL front month (January 2011) at 88.83 or so
ES / CL ratio is therefore about 13.71
Airline stocks noticeably weak and actually closed down yesterday, despite the big run-up in the S&P 500.
$XAL close on 2 December: 49.46
Commentary:
Oil is less than 0.5% away from the January 2011 52-week high of 89.10.
(edited to update: about 20 minutes after this post, Jan 2011 $WTIC reached a new multi-month high of 89.15, which is a new 52-week continuous contract high).
Unusual oil curve pricing where the Dec 2012, Dec 2013, Dec 2014 and Dec 2015 contracts are all offered below the January 2011 bid.
See thread here:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=211349
Oil has outperformed ES in the last month.
Apart from the last couple of days, airline stocks have been holding up well.
ES front month at 1218.00 or so
CL front month (January 2011) at 88.83 or so
ES / CL ratio is therefore about 13.71
Airline stocks noticeably weak and actually closed down yesterday, despite the big run-up in the S&P 500.
$XAL close on 2 December: 49.46
Commentary:
Oil is less than 0.5% away from the January 2011 52-week high of 89.10.
(edited to update: about 20 minutes after this post, Jan 2011 $WTIC reached a new multi-month high of 89.15, which is a new 52-week continuous contract high).
Unusual oil curve pricing where the Dec 2012, Dec 2013, Dec 2014 and Dec 2015 contracts are all offered below the January 2011 bid.
See thread here:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=211349
Oil has outperformed ES in the last month.
Apart from the last couple of days, airline stocks have been holding up well.
Airline fuel costs (dollars per gallon) higher in October:
http://www.bloomberg.com/news/2010-12-15/u-s-airline-fuel-costs-fell-in-oct-summary-table-.html
First rumblings from Delta about higher fuel costs:
http://www.reuters.com/article/idUSN1411609220101215?feedType=RSS&feedName=industrialsSector&rpc=43
"Delta said on Wednesday it expects an operating margin of 6 percent to 7 percent for the fourth quarter, compared with its prior view of 6 percent to 8 percent."
*****
More noticeably, the $XAL broke below the 50-DMA earlier in the week, and then below the 47.00 level today, down to levels last seen in October.
The $XAL reached a 52-week high in the first week of November, but has declined since then. On the other hand the $SPX reached a new 52-week high earlier this week.
I note that the $XAL soared in the 20 months from March 2009 to November 2010, so a pullback from the early November is to be expected.
I'll continue to watch the $XAL performance, particularly if and when oil goes back above $90.
http://www.bloomberg.com/news/2010-12-15/u-s-airline-fuel-costs-fell-in-oct-summary-table-.html
First rumblings from Delta about higher fuel costs:
http://www.reuters.com/article/idUSN1411609220101215?feedType=RSS&feedName=industrialsSector&rpc=43
"Delta said on Wednesday it expects an operating margin of 6 percent to 7 percent for the fourth quarter, compared with its prior view of 6 percent to 8 percent."
*****
More noticeably, the $XAL broke below the 50-DMA earlier in the week, and then below the 47.00 level today, down to levels last seen in October.
The $XAL reached a 52-week high in the first week of November, but has declined since then. On the other hand the $SPX reached a new 52-week high earlier this week.
I note that the $XAL soared in the 20 months from March 2009 to November 2010, so a pullback from the early November is to be expected.
I'll continue to watch the $XAL performance, particularly if and when oil goes back above $90.