Oil prices are generally a good barometer for the state of the world economy. In particular, the oil trend is of the greatest importance.
When demand is high and the economy is strong, the price rises and the trend is rising. This also gives rise to an upward trend in the stock market. Conversely, when the price of oil falls, it creates opposite winds for the shares and gives bearish moods.
In the chart above, we view this theory as a comparison of the US S&P500 and the West Texas Intermediate (CRUDE WTI) crude oil price.
Although the correlation is not perfect, it works well when looking for confirmatory indications of global financial sentiment.
As you can see, the two instruments reach their peak in October, making their bottom in December, and now they seem to be preparing to tandem to break short-term diagonal support, coming out of a wedge that is shaped like a bearish configuration for both instruments.
Does oil send bulls an important message?
Trader Martin Nikolov