Comparison of Crude Oil and the US Stock Market

For several months evidence has suggested  the US stock market could be approaching the end of the bull run since at least March 2020.  A  long-term comparison of the S&P 500 (SPX) with Crude Oil – WTI (CL2!) may give us a preview of what could happen in the next few months.

The monthly CL2! and SPX chart courtesy of Trading View shows the long-term comparison. CL2! Is the Trading View symbol for Crude Oil – WTI continuous Futures – next contract in front.

If the SPX is nearing a significant top, its logical to compare the SPX at its prior two important peaks with CL2!.

In March 2000, the SPX reached its ultimate bull market peak followed by a sharp 13% drop then slowly climbed to a secondary top in September 2000. After the CL2! top in March 2000 it declined 28% and then continued its bull run  making a new high in October 2000.

Subsequent to the October 2000 top both CL2! and SPX  were in bear markets.  Note that the CL2!    bear market ended in November 2001 almost a year before the SPX bear market termination.

October 2007 marked the end of a five-year SPX bull market. CL2!  made a short-term top in November 2007 followed by a sideways correction and ultimately peaked in July 2008 nine-months after the SPX top.

After July 2008 both CL2!  and SPX were in steep bear markets.  Again CL2! bottomed first making a bottom in December 2008 and then testing this low in February 2009.  The SPX ultimate bear market low was in March 2009.

If the SPX is nearing a significant top history suggests that the Crude Oil bull run could continue months after US stocks have peaked. 

The weekly Point & Figure chart of CL2!  illustrates where an important Crude Oil top could occur.

Point & Figure charts are a great tool to discover support/resistance areas.  Note the boxed in area represents the longest rows of “X’s” and “O’s” and potentially maximum resistance.  The zone ranges from 87 to 98, just above this is big round number resistance at 100.  It’s possible the bulls could push Crude Oil to 100, creating a lot of media buzz and a significant top.

As of 10/22/21 both the SPX and CL2! made new rally highs.  Within the next few months, the most likely scenario is a possible significant SPX top with a CL2!  peak coming months later. If this scenario plays out, the strongest part of an SPX  bear market could come after the Crude Oil bull market has ended.   

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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