Stocks-Crude Inverse Correlation Passes 2008 Levels, Just Off All Time Highs: Major Correction Ahead?
A week ago we presented the suddenly surprising inverse correlation between stocks and crude, commenting that: "the last time WTI to Stocks hit a correlation of -0.5 is just after the
market peaked in late 2007, early 2008, as the market had started its
decline which culminated with the global sell off of everything not
nailed down, bringing the S&P to 666. The correlation between the
two assets is again -0.5. If Brent confirms the WTI correlation, it may
be time to run." Subsequently every chartist jumped on this observation, yet it is today's update that is material significance: as of a few hours ago, the inverse correlation between the Brent front month has just passed the lows recorded in 2008, just before the market tumbled, when increases in oil prices no longer produced increasing stock prices (i.e., market topping). In other words, "it is now time to run" as we have just surpassed that level. And in fact, a longer term chart shows that we are just off the all time lows in the MSCI-Brent correlation. If this series continues dropping a correction is virtually assured.
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