Stocks-Crude Inverse Correlation Passes 2008 Levels, Just Off All Time Highs: Major Correction Ahead?

Tyler Durden's picture

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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asdasmos's picture

Realty Mogul, Sam Zell, Talks Inflation - says we're not seeing inflation because the CPI is distorted. (Mar. 3 2011)

Quixotic_Not's picture

No worries Sam, the printing wheels are still spinning due to out-of-control acceleration, once the rubber gets maximum traction you'll get your hyper-inflation  ;-)

Good luck getting the wages to increase at anywhere near that speed...ROFL

P.S.  Sam, keep your filthy hands off my FICA contributions!

As long as the USofA exists, that $800,000 my wife and I paid into the .GOV is a debt owed to us - inflation adjusted!

And we're still making involuntary contributions to Our retirement fund each & every quarter...or course I would settle for a lump sum ca$h-out  ;-)

How about let's close 99.99% of the 1000+ US .MIL bases around the globe and focus work on cleaning house back home?

OK you fuckin' whinging bankster?

covert's picture

when it looks too good to be true, you can be sure that it is.


max2205's picture

and the 3:30 Ramp begins

disabledvet's picture

i did.  it was the song requested on the tarmac before Haiti--and i sang it.  of course a black prince is one thing--a dark prince is another.

rubearish10's picture

Sure, unless every current and future revolution reaches a happy conclusion because, after all, if there were no revolutions/MENA unrest etc,,,,we shouldn't even be talkin' 'bout a correlation knockdown. Everyone relax, all is good in the world, just look at the bounceback happening right now.

RmcAZ's picture

None of this matters... correlations, technicals, fundamentals, anything. The only thing that matters is BTFD. The ramp job is going to happen no matter what.

erikig's picture

I'm afraid this looks a little different from the last dip due to the stretched OIL prices.

Take a look at the SPX/WTIC ratio and the break it had the last couple of days.$SPX:$WTIC&p=D&yr=3&mn=0&dy=0&id=p45100742126

Buy the dip, but know when to exit...

alien-IQ's picture

however, what you fail to point out in this observation is that the last time such a correlation existed...we didn't have i-pads (let alone the i-pad 2)...this's different.

10kby2k's picture

Well, shit, it looks like ZH is correct .....  O'Bommy talks of tapping the strategic reserve and using the military and Kudlow (and the CNBC gang) talk about rate hikes and ending QE2 to strengthen dollar and curb inflation.

Do they see the big picture?   NO, they just can't handle the backlash of $4 gas.

SheepDog-One's picture

Obama himself said $7 gas is coming, in fact he said it would be here by January but apparently theyre getting cold feet, or something simply isnt in place yet for it.

10kby2k's picture

Sheep-dog:  That was in response to the Gulf spill and his projected cost to raise revenue to combat global warming.

alangreedspank's picture


More like 5-6$ gas.

Certrain parts of Canada have been paying 4$ a gallon for even more than 10 years.


10kby2k's picture

many americans are pussies....when economy was zooming they were spazzed about $4.50 (in 2007)

i am an overweight american: i want cheap food, cheap gas, full salary pension at age 55 (maximum), perfect medical care, huge lawsuit settlements, all my lazy and illegal relatives provided for and all the Kool Aid i can drink

TradingJoe's picture

Benjamin is the only man on the planet who "knows"


When the "correction" is Cuming!

TooBearish's picture

probably means CL/Brent will take a huge dumper

Tyler Durden's picture

And stocks will surge, meaning neg. correlation gets even more negative.

Arkadaba's picture

Well there is a limit to how negative a correlation can get (I'm sure you know). What I'm not sure about these days is what the dependent variable is. And correlation is an interesting and useful stat to look at when you can isolate two variables. But right now .... too many variables in play.

disabledvet's picture

i agree. "it's not gonna happen."  price of oil et al stay high.  if the plan is to actually pay the bills i would argue as well war is inevitable however.  i'm a religious man but it doesn't take much for me to say "government is God."  period.

DoctoRx's picture

Exactly right.  And then, one day-month-year in the future, they will correlate again.  It's all in TPTB's plan.  All the new "money" will go into one asset class or another, and correlations will work till they don't, so that the value of trading revenues and insider info will be maximized.  Meanwhile they key is that cash is trash-- till they crash the whole shebang again.  When and from what level?  Them that know ain't telling ZHers.  

Jendrzejczyk's picture

OT:  Hundreds of protesting homeowners occupying Bank of America lobby in Washington

alien-IQ's picture

little hints of rebellion from the american sheeple every now and then...there just may be some hope after all:-)

serotonindumptruck's picture

Just wait until those "sheeple" run out of food to eat. We ain't seen nothin' yet!

TeamAmerica's picture

Yes, let's have a civil war.  That's something to hope for. /sarc

alien-IQ's picture

nobody is hoping for a civil war...we're merely hoping people muster up the guts to finally tell TPTB "please remove your dick from my ass".

granted, some are perfectly happy with a dick in their ass (and there's nothing wrong with that if that's your particular cup of Joe)..however those who do not enjoy a dick in their ass might just want to inform the owner of said dick that any further penetration will be frowned upon.

velobabe's picture

that statement including dick and ass could be perceived as torture†

Village Idiot's picture

It's a start.  Have pride, people.

Zero Govt's picture

yes it IS a start... cracks starting, the countdown begins...

irishlink's picture

++ and we are now in a totally different space. Investors are still cautious and still remembering the drumming they got in 2008. It is the big guys game for the past two years and they don't run for the exits while there is still money on the table. They love stuff like this. lots of volatility and huge swings. ALL their birthdays come at once!

cougar_w's picture

If this series continues dropping a correction is virtually assured.

What is the causation for that? Money flight from equities on expectation of loss of profit for manufacturers? Margin covers? Why do we jump out of stocks on oil pricing?

SheepDog-One's picture

Im jumping in firearms myself. 'Investments' dont have to be just stocks bonds and oil. None of those things will do any good soon, but some Dinty Moore while watching the food riots and bank runs is winning in itself. Remember, head shots for zombies.

serotonindumptruck's picture


Brilliant investment strategy!

Sudden Debt's picture

Second rule in Zombieland = Cardio


cougar_w's picture


So it's the "oil over $100/bbl tanks the economy" angle. And then I guess a large liquidation in "anything not nailed down" knocks the bottom out, and the rolling sell-off does the rest.

Maybe not this time, they are ready, there won't be a freefall at least not without a fight. The Fed has a finger on the pomo trigger they might be able to lift things up enough to staunch the bleeding. And they can announce QE3 in no uncertain terms, give a $trillion to the TBTF, ignite an equities buying frenzy. So I guess we'll have to wait and see.

hambone's picture


I don't get how they simply announce QE3???  How w/ everything juiced beyond belief the Republicans wouldn't have a field day w/ the publicity...pretty sure there would be a very strong negative reaction from a segment of the population. 

Seems QE3 has to be in response to a new "crisis" - what will that "crisis" be???  Engineered, subverted, make believe???  Something has to allow them to do it...I just can't see it yet (and of course they can't survive without it as the T market is a $4-$5T annual black hole that only the Fed can feed to avoid interest rate shock and turn on a dime deflation). 

But how???  In response to war???  The hole right ahead of is sooo large I left to come up w/ any idea, crack pot or not to try and imagine how the Fed avoids the head on w/ reality???

Commander Cody's picture

Reality?  You want to see logic?  There is only smoke and mirrors.  The Fed will print until the dollar is worthless.  Who else is gonna buy treasuries when the US keeps falling deeper in the hole?  The Fed will print relentlessly as the bankster bitches they are.

cougar_w's picture

The Fed will get their head-on with reality, and they know that for a fact.

They want to hit the wall long after everyone else, that's all. Whoever hits the wall last dies with the most toys. And wins.

i think they have their crisis in the bag; a surge in oil, talk of Saudi peaking, and Arab unrest in the wings. We haven't had a noteworthy stocks down-day in 2 years. They can wait for a bad day (-5%) and go to Congress trotting out the MAD donkey, and they'll get $2T and a "please save us!" cry on bent knee across both parties.

A repeat of 2008 (or worse) simply will not be tolerated nor allowed.

And really they only have to play this game until Europe implodes and China ignites in riots. And then the world starts over, though we haven't seen much of that playbook as yet. My guess is neoFeudalism of some flavor, but I would not be surprised to see a military takeover centered in the US and spreading from there. But that's just me guessing.

velobabe's picture

cougar, the best kitty of them all† what about the flash crash, that was pretty dramatic down day, though didn't last.

guess what, øhedge got voted #9th best financial blog, whatever that means. also øH only needs 71 more tweeters to follow øhedge to get to 20,000 twenty thousand strong. i think this charlie sheen guy should do some pomo for ZH.

disabledvet's picture

flash crash...ahhh, the good old days.  "breaking trades" no less!  Wall Street as crock of shit in totality.  I must say some "Charlie Sheen pomo" would entertaining...perhaps "live from Port a Prince" (sp?) just to "make it seem like something other than a show."  the fact is "all of America is on the dole."  they'll blow up their banker--but will do anything to keep that gov check flowing.  you know, i know it, and now even your Banzai's evil kittie's know it too.

cougar_w's picture

Hey there velo ... They staged the flash-crash last time. I don't recall the reason (something in Congress was being voted on that week IIRC) and they threw a wrench in the gears to scare shit out of people who needed some schooling.

Worked too. It's been a long time without anything to upset their profit making. Though it did spook off retail traders for a while, I think they hadn't planned for that part.

They'll do that kind of thing once a week if they have to. It means nothing and retail is already dead.

MolotovCockhead's picture

   I don't get how they simply announce QE3???

This one is easy! Just send in their Wall Street speculators to drive up the oil price! When gas hit $5 at the pump, it will be more than reason enough for Helicopter Ben to hit the printing press at full speed! That way they get to keep the money they make from the oil speculation and their cronies get a new bout of QE shower. One stone two birds.

disabledvet's picture

even easier than that.  it's called "Helicopter Obama" now.

irishlink's picture

Finally!! The American people are waking up! How come MSM have not highlighted this today?  The bankers will be wary of their customers now. What will happen when rates return to norm or higher and a whole generation goes into shock?

Sudden Debt's picture

Tyler, what do you think will happen to silver if there would be a correction?

would silver and gold also correct like it did in 2009?


luk427's picture

I think the physical buying would be beyond belief if we had that kind of correction.