ETF Correlations as of the Close of Friday, February 15, 2013

Rolling 60-day correlations of SPY with TLT, FXE, GLD, SLV, USO and DBC, and trends developing since the last report on February 1, 2013. Correlation of stocks with commodities is trending down while most other correlations have remained stable.  

This is a bi-weekly report. The vertical mark on the chart below is set at February 1, 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 Friday, February 15, 2013 are shown on the right side of each pane:

ETF_60_20130215

TLT: Anti-correlation with SPY dropped from -0.69 to -0.63 as yields did not follow the stock rally. There is a lot of skepticism about whether the stock rally is sustainable and as a result investors are not massively selling bonds at this point.

FXE: The correlation with stocks increased slightly from +0.30 to +0.32. 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 from +0.22 to +0.20. Stocks rallied but gold was hit by massive selling as expected here in advance.

SLV: The correlation with stocks increased from +0.24 to +0.29. As of the close of Friday, SLV is sitting at an important support level.

USO: The correlation with stocks decreased from +0.46 to +0.34. In the last four weeks the correlation has dropped +0.19 possibly marking a significant change in the way the two markets are related. There are claims that the US is gaining independence from OPEC and as a result oil prices will soon plunge. This is of course unless “something” happens and we all know that events that support oil prices tend to occur when a slide starts.

DBC: The correlation with stocks decreased from +0.40 to +0.23. The rally in stocks is not fuelling a rally in commodities at least for now. In the last four weeks, the correlation has dropped +0.25, a significant change showing that the process of financialization of commodities is currently experiencing a setback, which is good for consumers and bad for producers, although this is mostly a zero-sum game.

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/”) 

Disclaimer

 

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