Oil Versus SPX Daily Chart

Using the USO ETF as a proxy for oil price, and plotting it against the SPX shows how oil and the broad markets are moving in lockstep.  The oil price tends to play a leadership rule turning a hair ahead of the SPX and leading in that direction.  Last Thursday, after release of the inventory data, oil plummeted into Friday.  A divergence occurred between the two red lines since the SPX price moved sideways as oil fell.  On Friday, the relationship was in sync again until the final minutes where the SPX shot upwards into the close.

When two tickers are compared on a chart, the one deviating the most from the zero line typically has to correct the most as time moves forward.  Note how the oil price drastically corrected, from the high reading above the zero line, in the middle of last week. SPX is now at its highest height above the zero line.

Oil trailed lower into Friday's close, if that trend continues, SPX price should follow along lower. Watch this relationship closely.  In general, as the Strait of Hormuz drama lessens, and the Nigerian tensions lessen, and perhaps China and the global growth picture continues to slow, oil price should leak lower dragging the broad markets lower.  This information is for educational and entertainment purposes only.  Do not invest based on anyting you read or view here.  Consult your financial advisor before making any investment decision.