Sunday, October 11, 2015

WTIC Crude Oil Daily Chart Leads the Stock Market

As oil goes, so goes the market. West Texas Intermediate Crude peaked in May-June and rolled over. The S&P 500 peaked in July so oil is leading the markets. Oil drops like a stone and the stock market followed oil down the rabbit hole. In late August, oil recovers, and voila, stocks recover. Oil then runs higher but stalls into a sideways triangle pattern so the stock market stalls sideways.

WTIC oil then breaks out above the upper trend line of the blue triangle, then up through the 48 resistance level from late August. The happy oil move creates optimism in the S&P 500 and stocks rally. Oil continues higher battling at the 50 level and stocks remain elevated.

As oil prices rise, traders run back into energy, oil and gas stocks which sends the broad indexes higher. As oil drops in price, traders exit the same stocks which drags the broad market lower. Watch oil. Oil down means stocks down. Oil up and stocks are up. Typically, dollar down is oil up and stocks up. Dollar up is oil down and stocks down. The US dollar index, however, is not following this pattern as religiously as expected since the Fed and other central bankers continue intervening in markets.

The US and Europe are in a delicate balance since a rising US dollar index sends the euro lower and a rising euro sends the dollar lower. ECB President Mario Draghi needs a lower euro to boost exports and the European economy and is performing his own obscene Keynesian quantitative easing (money printing) to achieve this goal. Draghi is losing the battle in the short term, however, as the euro runs higher above 1.13.

If the ECB's QE program works, the euro will drop which will send the US dollar index higher. Reference the prior paragraph where a higher dollar will send oil and the US stock markets lower. Hence, now you understand the dilemma these sick central bankers are facing as they pretend to be the Wizards of Oz working the levers of the global economic machine behind the Keynesian curtain. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.