claydoctor

The 2002 Oil - SPX500 - Dollar Euro - This time OIL saves us ??

FX:SPX500   S&P 500 Index
2
In 2002 Oil bottomed, and bounced while the SPX500 descended another 31% over 135 days. Note how the currency pair USDJPY and the SPX500 were twins, and the EURUSD and OIL were also twins, and both twins were inverse. However, this time OIL lead everything down first. And although the indexes eventually followed, the SPX500 has turned down, but not without a ton if resistance, and not as much (yet?). This is just one example. The bounce in oil doesn't always happens this way, but just to show that we could see an additional downturn for an extended time of the SPX500 and oil going up significantly. In fact , this time, It comes down to the US govt and FED trying to figure out how they can stimulate inflation, to avoid deflation, without lowering rates below zero, or starting another round of QE (which would scare the markets). All this talk at Jackson Hole is great, and the tough talk about they don't care about a volatile market effective their long term goals, right... and they will raise rates anyway, they are either idiots or their pride will go before their fall, and do like the Japanese did, and raise rates at the absolute wrong time, and then have to fight deflation with what - NOTHING - BECAUSE THERE IS NOTHING TO FIGHT DEFLATION WITH. The ONLY OPTION IS TO FIGURE OUT A WAY TO ARTIFICIALLY RAISE THE PRICE OF OIL(and there are many ways to do it don't kid yourself), WHICH LOWERS THE DOLLAR STRENGTH, WHICH STARTS A LITTLE INFLATION, and the markets will fall, but that casualty will have to do for now, so they can avoid a systemic deflation risk at stake here - IT IS CALLED DEFLATION, which is roaring in smaller countries that are oil producers, and economies are going bankrupt because of it, it just isn't in the main stream US news. Watch the stock rotation from other sectors to XLE, XOP and the like, once this becomes known. So maybe this time it won't be the banks or housing that leads us out of the bottom, but the OIL SECTOR.
Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.