The correlation between the price of the S&P500 and Oil is strong. The stock market has fallen recently which could be a sign of what is to come for the price of Oil.
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WTI Crude Oil Analysis
The price of Oil has remained bullish despite the recent risk off environment the market has been in. This could soon change as the FOMC are likely to announce when they are ending their stimulus plans and hiking rates. The current stimulus should end in March which should lead the Fed into hiking rates by 50 bps.
Not only this but the correlation between the S&P500 and Oil has diverged of late. This could be due to other factors globally such as the rise in inflation and Oil supplies. However, if this correlation starts to get stronger the price of Oil could follow the recent drop in the S&P500.
Looking at the charts we can see that the market is finding resistance at the current swing highs. The price has already traded below last week’s low which suggests that sellers are active around these levels. If the price was to form a new low on the 4hr time frame sellers will be more likely to continue the trend.
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