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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: forceOfHabit who wrote (74264)11/17/2006 11:25:11 AM
From: mishedlo  Read Replies (3) of 110194
 
Oil prices rose from 20 to 80 dollars with the stock market heading up.

here is a chart to prove it
futuresource.com

If oil was inversely correlated with the stock market that chart would not have happened. Thus it is silly to say that stocks rallied because oil fell.

Stocks rallied huge when oil rose and that chart above proves it.
There are many many factors that might have caused stocks to when oil fell. Perhaps they were rallying on the goldilocks pause theory, on excess liquidity, on manipulation in front of the election, etc etc.

We can rule out oil however because the above charts shows there is no long term inverse correlation.

If anything it should make sense that stocks would rally when oil demand is high because that is the sign of a strong economy. And that is just what the stock market did for several years.

Finally there are supply demand considerations when looking at oil. Is there a supply shock causing prices to rise or are prices rising because of strong demand. Those factors are meaningful but not noted on the charts. Thus you may find periods where oil appears to be correlated and periods where it is not.

Stocks did not rally for 3 years because oil was headed up then rally for 3 more months because it was headed down. The notion is silly.

Mish
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