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The S&P 500 and Brent Oil are basically the Same Market

EconMatters's picture




 

By EconMatters

 

 

Portraits from the Dark Period

 

"The price has nothing to do with a shortage of oil. There's a lot of oil on the market. It's because of speculation and OPEC cannot control speculation."  Quote by OPEC Secretary General Badri.

 

Some people are audible learners, some learn based on touch, some by interaction, for the visual leaners out there I provide the following work of art, which I call the “Risk-On Correlated Asset Motif” from the Dark Period by Jerauld de Speculator. 

 

1 – Day S&P 500 & Brent Oil Comparison

 

4 – Month S&P 500 & Brent Oil Comparison

 

6 – Month S&P 500 & Brent Oil Comparison

 

9 – Month S&P 500 & Brent Oil Comparison

 

2 – Year S&P 500 & Brent Oil Comparison

 

3 – Year S&P 500 & Brent Oil Comparison

 

5 – Year S&P 500 & Brent Oil Comparison 

 

Correlated Global Markets require one thing, a whole lot of Juice!

 

The first thing you have to realize about markets is that they are crooked. If you believe the price of oil has anything to do with the stuff that comes out of the ground, then I have some nice beachfront property in Louisiana for you. 

 

It is all about the juice, whether it is 401k money coming in the beginning of each month, Central Bank injections, share buybacks, increasing leverage ratios, or currency funding the initial money has to be there in what I call the juice for markets, and I mean all markets. 

 

This is why before and during almost any major up move in markets traders go to the EUR/USD and USD/JPY funding crosses for the juice to propel the move. It all starts with the juice, that is what determines price in markets. 

 

This is why the S&P 500 has stalled for a couple days; traders are waiting for the next juice injection into markets. There would have to be some ‘crazy good’ news for firms to extend their leverage ratios at this point, so they wait for the next big fed injection, major currency move, or 401k money for their next major move up in markets.

 

Finally, those traders who think they are trading oil, you are actually trading the S&P 500, for all intents and purposes, it is the very same liquidity fueled market.

 

 

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Thu, 02/14/2013 - 13:35 | 3243527 Bicycle Repairman
Bicycle Repairman's picture

So speculation drives the market.  The end.

Thu, 02/14/2013 - 09:51 | 3242773 John Law Lives
John Law Lives's picture

"If you believe the price of oil has anything to do with the stuff that comes out of the ground, then I have some nice beachfront property in Louisiana for you."

The gist of your comment is understood, but Louisiana has some nice beachfront property along the Gulf of Mexico.  Hurricanes Katrina and Rita did make their marks upon it, but I wouldn't kick them while they are down.

Thu, 02/14/2013 - 08:25 | 3242600 Racer
Racer's picture

Aren't all 'markets' correlated now that it is only the machines doing the churning at faster than light speeds?

Thu, 02/14/2013 - 07:49 | 3242554 Solarman
Solarman's picture

I think you have it ass backwards.  For those trading the S&P, you are trading the oil markets.  It  has everything to do with buying something tangible in a fiat reflationary world.

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