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The chart below was published a week ago, reflecting that Crude Oil and the S&P 500 index have been highly correlated over the past five years (see post here).

 

 

Crude Oil has created a series of lower highs over the past 2 years. Should the 500 index be concerned about this channel/price action? The chart below gives us an updated clue.

 

 

Does Crude Oil lead the 500 index or is it the other way around? I will let you answer that one. When it comes to portfolio construction, this correlation is a factor in determining how much individuals and professionals should allocate toward risk assets. The top chart does reflect that the 500 index and Crude oil have been high degree of correlation over the past few years.

The series of lower highs/falling channel could be sending a key global message. The updated chart reflects that Crude Oil has broken support of a bearish rising wedge this past week.

 

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