Is there a correlation between Crude Oil Futures and the Dow? And can this correlation be quantified?
In my August 30, 2006 market summary, I wrote how ?we would be foolish not to avail ourselves of the inverse pricing relationship between crude-oil and the Dow Jones Industrial Average. Since then, the price of crude has fallen $6.35 and the Dow is 227 points to the upside.
But, now that the distance between these two indicators appears to be excessive, will this wide discrepancy begin to shrink?
In August, energy prices were approaching $80 a barrel, the major equity indices were flat, but as the continuous NYMEX light sweet crude-oil futures contract (CL #F) was sputtering, the markets began spurting upwards. If you compare the 60-minute pricing between crude-oil with the Dow Jones Industrial Average there was a strong inverse correlation (-.616), which demonstrates the persuasive influence of crude prices on the market.
Although the Dow pushed ahead 429.53 points in the...
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