Note the 69%, 66%, 61% 76% drops in crude oil prices going back to 1986 and see how those drops impacted the future of the stock market. We don't know with certainty that this pattern will continue, but it is interesting to look at the market and see what you can learn from what has happened in the past.
In 1986, crude oil crashed from the $30 level and dropped down to the $10 level and created a solid level of support that held the 1987 crash in late 1987.
The 1991 drop in crude oil was a solid platform where prices advanced from without much downside risk.
The 1994 ultimate bottom in crude oil proved to be another launching pad for what was to be the internet bubble from 1995-2000.
The 1998 drop in crude proved to be an important drop because it held the 2002-2003 bottom and later on it also held the 2008-2009 bottom too.
The current drop is taking awhile to form a base, but the psychology is very similar.
Post your version of this chart or your comments.
All the best,
Tim
2/24/2016 DJIA 16407 last, S&P500 1920
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I had these charts lined up when I published them, but they shifted. The start of the green box for the S&P matches up to the high in crude oil. I think the 1986 analogy is the best analogy to the current market.
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The "crude oil bottom of 2016" did indeed great the base that was tested later on in 2016. The pattern continues....
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It continued indeed.
Tim September 4, 2018 12:00AM EST
Comments
SynergyCharts
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My two premises on oil....
Great correlation Tim....I agree with your view.
cooney_s
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Agreed, the Oil vs Equities correlation is coming back in full swing.
MHIGUERA
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agree! thanks for charing!
RIKONIKO
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Very good analysis!!!
IvanLabrie
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Amazing...
A-shot
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Did you meadn Dow? "The start of the green box for the S&P"
Also, about bottoms that lead to further raise in the markets. In 2008 (and possibly the rest) what was the reason for the Oil Drop? Because i feel that then everything dropped with the collapse (gold including). So i'm not quite sure what dictated the bottom there - oil, or markets to oil?
timwest
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Right - S&P or DJIA - almost interchangeable.
timwest
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Can you re-state your question about 2008?
A-shot
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It seems that the markets started going down before oil did in 2008. So i wonder if that invalidates the idea in a way because the reason for the drop i think is also important to study i think
Great correlation Tim....I agree with your view.