CRUDE OIL vs SPX

2022年9月1日

September and October in red?

1. What Is Crude Oil?
Crude oil is a naturally occurring petroleum product composed of hydrocarbon deposits and other organic materials.
A type of fossil fuel, crude oil is refined to produce usable products including gasoline, diesel, and various other forms of petrochemicals.
It is a nonrenewable resource, which means that it can't be replaced naturally at the rate we consume it and is, therefore, a limited resource.
(Investopedia)

2. KEY TAKEWAYS
- Crude oil is a raw natural resource that is extracted from the earth and refined into products such as gasoline, jet fuel, and other petroleum products.
- Crude oil is a global commodity that trades in markets around the world, both as spot oil and via derivative contracts.
- Many economists view crude oil as the single most important commodity in the world as it is currently the primary source of energy production.
(Investopedia)

3. Stock Market
The Brent Crude oil was originally produced from the Brent oilfield in the North Sea.
About 2/3rds of all crude oil contracts around the globe include Brent Crude oil, making it the most popular marker.
Its relatively low density and sulfur content are the reasons why it’s described as light and sweet.
One of the advantages is transportation since this type of oil is waterborne.
The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum and has a UKOIL ticker symbol.
(TradingView)

4. Correlation with SPX and market sentiment forecast
As mentioned, many economists view crude oil as the single most important commodity in the world as it is currently the primary source of energy production.
Therefore, it is important to consider how this market can impact other sectors.
Looking at UKOIL in parallel with SPX and their correlation, we can see that September and October have a very bad track record.

See red circles.

When crude oil broke down the red channel between $100 and $88, the market did not react well.
At the moment UKOIL is in the same region as 2008 and 2014, with the correlation about to equalize and the prices of the two symbols fall together.

So I don't know if is a good time to go long.