Australian Investment Blog

Signs are occurring of a US equities - oil disconnect

Good morning everyone and welcome to the first day of Autumn!OverviewHistorically oil and stocks prices move in opposite directions which is understandable because the majority of the economy / companies clearly benefit from cheap oil and vice versa.Somewhat unusually, the recent plunge in oil prices has had a strong correlation between oil and stock markets with a number of ‘related’ implied and real factors also influencing the current scenario e.g. fears of deflation and the damage of negative interest rates.However last night signs of a move back to normality surfaced with oil rallying over 3% but the Dow falling 123 points, after initially rallying ~100 points with the initial surge in oil.Turning to the MarketsMarket Matters remains cautiously positive US equities but believes a short term correction to the last 3 weeks’ rally is likely and the next 1-2 weeks will determine if US stocks can make healthy gains in the next few months.For subscribers who are traders, or short term investors looking for ideal levels to buy stocks, our target is around 1880 for the S&P500 i.e. 2.5% lower.