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Crude and SPY: Implications charts and analysis

Discussion in 'Market Predictions and Reports' started by ga082003, Sep 19, 2011.

  1. ga082003

    ga082003 Recruit

    Sep 11, 2011
    Likes Received:
    Crude and SPY are as intimately woven as anything else. They have probably one of the best regression coefficients with the equity indices (esp SPY) and thus highlighting the multi asset pull of Bernanke QE moves.

    We analyse crude daily, weekly and monthly charts and the proceed to understand the love relationship between SPY and Crude. Finally we will look at crude fundamental given that SPY rarely does not track crude in the medium term


    On the daily charts crude has broken through the uptrend extending from 2009 onwards. Mnay would call that giant bear flag which when broken is signifying a significant drop unless we see it shoot back into the channel.
    To suggest a coming back into the channel logic, stochastic are now pointing to a sharp move while the bearishness index has now marginally broken into the positive with the green vortex (14 day) is well above the red vortex. The 14 RSI is pointing downwards but RSI is lagging indicator and hence can change.

    Crude Weekly Charts
    On the Weekly charts, crude is looking quite weak with weak stochastic (9 week) and bearish vortex with the 9 week vortex pointing us to further weekly loses. The 21 week RSI is depressed at 21 levels for the longest period of time since Oct 2008 which can only mean that there are further unwinding left on the weekly charts.

    The direction for a long term trader (As indicated by the weekly charts is quite clearly downwards).

    Crude Monthly vs SPY Monthly Correlation
    A key chart indicating the intense relationship between various asset classes across the world, is the SPY Monthly and the Crude Monthly Charts. There is 91% regression coefficient from 2006-2011. The regression only increased after both the QEs which only goes to prove the dangerous FED moves to pump in liquidity which is only ending up pulling assets classes up while doing no great benefit for the real economy.

    Source: Rest of the chart and analysis

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