Do oil and stocks have the relationship they once had?

We can look back on this chart and see over here we’ve got oil - the USO ETF - in purple We can see that falling sharply back there last summer; this little line showing that. While stocks moved sideways to slightly higher. And then you could see wasn't good for stocks after that. The black line is the SPY ETF falling hard.

Again, we have oil with the divergence to start making a lower high over here stocks making a higher high and then oil dragging the whole thing down. No divergences down here - they bought them together.

Here we have a fake out with oil falling for maybe a week or so before recovering and stocks dipping a little bit but not breaking down. This stuff doesn't work perfectly and nothing really does in the markets, of course.

But here we have another condition now look at this. Oil has been falling for not quite 2 months . Stocks as we all know with the Brexit dump and then this huge rally over the past couple of weeks but you can see that oil is not not saying anything good about it. If this correlation is still in effect then this fall in oil price is not a good sign for stocks.

There's plenty of other reasons to look at stocks and say well the trend is up and breadth is good and all of the kind of things that would get you to be bullish including the breakout to all-time highs. But I don't think it's as it seems. There's a lot of things that I don't like below the surface and again if the oil correlation still holds then this is just another another reason to be careful. https://www.youtube.com/watch?v=IWX1o0Xi5Kk

Submitted July 21, 2016 at 10:34AM by TechnicianApp http://ift.tt/29Wq2mR