If it seems like the S&P 500 and the Dollar move in the opposite direction of each other on a daily basis, it's because they pretty much do. In fact, since daily pricing of the US Dollar begins in 1970, the six month correlation between the daily change of the two is at its most negative level ever. The next most negative level of correlation between US stocks and the dollar came in 1982. We can only hope, however, that our stocks and currency can perform like they did in the years following 1982.
I wrote about this correlation on my blog recently.
I am an Oil Trader and I am particularly interested in the oil market. Can you post a similar study about the Oil and US Dollar correlation?
I think it will be quite surprising.
By the way, I am posting my trading in real time at,
http://oiltradersblog.blogspot.com/
I am a great fan of your site. keep up the good work,
Posted by: Henrique Simoes | June 17, 2009 at 07:13 PM
This has been a nice tell during intra-day trading. Thanks for showing the big picture!
Damien
Posted by: Damien Hoffman | June 17, 2009 at 11:59 PM
It would be particularly instructive to show the US equity - other markets (i.e. a performance differential) because the US Dollar is a relative measure i.e. it is measured against against other currencies.
Setting aside exchange rate effects on exports, oil prices etc, under the law of one price shouldn't we anyway expect the price of US securities to rise to offset a fall in the USD, and vice-versa, or is PPP theory too weak to apply to the stock market?
Posted by: Riz | June 18, 2009 at 03:08 AM
This has been a nice tell during intra-day trading. Thanks for showing the big picture!
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