Rolling 60-day correlations of SPY with TLT, FXE, GLD, SLV, USO and DBC, and trends developing since the last report on January 4, 2013. This is a bi-weekly report. Just a few clues about the markets can be found in recent correlations.
The vertical mark on the chart below is set at January 4, 2013, and at the top left of each pane are shown the corresponding correlation values for that date. The values as of the close of January 18, 2013 are shown on the right side of each pane:
TLT: Anti-correlation with SPY decreased slightly from -0.68 to -0.66. It has been stable for the past two weeks.
FXE: The correlation with stocks decreased further from +0.40 to +0.34. In the last 4 weeks, the correlation has dropped 0.19. Although both the stock market and EURUSD are rising, the moves are out of sync because of conflicting fundamentals.
GLD: The correlation with stocks dropped slightly for +0.33 to +0.30. No significant change here. The future of gold is uncertain at this point.
SLV: Correlation with stocks remained stable, gaining only +0.01 to close at +0.35.
USO: The correlation increased from +0.48 to +0.53. Crude oil is tracking the stock market closely as soem speculators perceive any rise in stocks as an indication of future demand in crude oil. Obviously, they are wrong as they have been before. The stock market and the broad economy have disconnected long ago. Fueling a rally in stocks can only change the psychology temporarily.
DBC: The correlation with stocks increased slightly from +0.46 to +0.48. The stable correlation given the sharp rise in stocks may mean that expectations of rising commodity demand in the near future remain low. This ain’t 2008 for sure.
Disclosure: no relevant position at the time of this post and no plans to initiate any positions within the next 72 hours..
Charting program: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software. http://www.amibroker.com/”)