We are weary… and very so… about hearing of the supposed strong relationship between stock prices and energy and we have had quite enough of it to last a very long while. The simple fact of the matter is, judging from the two charts the page previoius of WTI crude and the S&P in monthly terms going back to the spring of ’11, that if there is a correlation between the two it is utterly negative, not positive. Note then that since the spring of ’11, stocks have gone higher, and markedly, relentlessly so. What then of crude oil prices? Well, they have gone markedly and relentlessly lower.
So, let us put this nonsense behind us that crude and stocks trade one with the other; they do not, and thinking that they do can and will lead to eventual chaos and massive losses… both of mental and real capital. ‘Nuff said, save to say that it is time to buy crude oil and to sell equity futures, with the only problem now to decide how to weight the position; that is, do we sell equal dollar sums on both sides or do we weight the trade for “beta,” if there is such a thing for crude oil.
We shall try to research that today and tomorrow and perhaps for most of this week, for that shall be a critical, deciding factor in the implementation of this position
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