Oil Prices Per Barrel courtesy of Stockcharts.com
Here we see oil having closed the week at an all-time-record-high, close to $145 for a barrel of oil………..And there is an inverse relationship that has developed between upward spikes in oil prices and the stock market, and that inverse relationship has really been showing up now for some time.Since March 2003, Bob Brinker was fully invested in the stock market with all in buys for the S&P500 in the mid 1400s, mid 1300s and even the mid 1200s as shown on this graph.
Now why is there this correlation – we see the S&P 500 sitting in in the 1240 area. We see the Dow sitting in at 11,100 area. We see the Nasdaq Composite trading in the 2200’s. Why is there this correlation between the price of a barrel of oil and what goes on in the stock market? I think the answer to that question is easy, and that is consumers, wind up with less money to spend when they get pounded with these higher costs of energy, costs of gasoline, all the products in the energy complex. And that weakens the status of the consumer and also delays the potential for economic recovery.
"The stock market wants to see an economic recovery scenario. It does not want to see an increased oil price scenario, which is was it’s seeing right now. Now I wish I could tell you what the price of oil is going to be in a week, a month, a year. I don’t know. I have no way of knowing and I think only a fool would try to forecast the price of a barrel of oil in the world we live in…….”
The price of oil AND the stock markets have crashed so the "inverse relationship" is not valid at all.
High oil prices were due to booming global economies creating huge demand with speculators piling on to push prices higher. This was not rocket science but simple economics of supply and demand.
Likewise, today we are plunging into a global recession with many fearing depression. Obviously the demand for oil is plunging which leads to plunging oil prices.
Now the market is at:
|12/05/2008 ET||Last||Change||As of:|
I think only a fool would try to forecast the price of the stock market in the world we live in…….I am not holding my breath. It is very hard to sell a newsletter called "Marketimer" when your market timing has you wildly bullish with a "gift horse buy" in the mid 1400s just before the biggest market crash since the Great Depression!