Word on Wall Street is -- High oil prices are to rising equities what a blaring siren is to a baking soufflé. See: Friday, June 13 news item regarding the 365 point cave in of the Dow Jones Industrial Average: “Oil prices were the primary culprit [for] the epic collapse.” (Forbes)
The problem is -- there’s no concrete evidence whatsoever to support such a claim. Never has been. Never will be, safe to say. All you have to do is compare price charts of oil and stocks; nothing sets the record straighter. Take a look, for example, at the following archive of oil prices verses the DJIA since the heyday of the late 1990’s economic boom:
· January 1997 to February 1999: Oil prices drop $23.84 to $9.31 per barrel -- AND -- the DJIA rises 6544 to 9513.
· February 1999 to January 1, 2000: Oil nearly triples $9.31 to $25.59 p.b. -- AND -- the DJIA rallies 9513 to 11,750
· January 2000 to October 2002: Oil swings up $25 to $32, then down $32 to $16, then back up again$16to $25 -- AND -- the DJIA endures its most sustained downtrend since the Great Depression
· October 2002 to August 2005: Oil rockets $25.82 to above $60 per barrel – AND -- the DJIA rebounds 7181 to 10,735.
· August 2005 to December 2005: Oil plunges 20% to a 10-month low -- AND -- the DJIA barely lifts its head from 10,735 to 10.950.
(Editor’s Note: Right at its August 2005 peak, the August 29, 2005 Short Term Update wrote: “Oil is at or very near the end of its surge.” Now, the June 2008 Elliott Wave Financial Forecast shows you whether the case for an end in oil’s rise is here. Learn More)
· December 2005 to July 2006: Oil soars from below $50 to just below $80 p.b. -- AND -- the DJIA continues to climb 10,950 to 11,282.
· July 2006 to January 2007: Oil suffers a 36% sell-off to an 18-month low -- AND -- the DJIA rises above the never-before-seen 12,000 mark.
(The July 2006 Elliott Wave Theorist went on high alert to crude’s downside and wrote: “A top is occurring now. A setback is due.”)
· January 2007 to October 2007: Oil lifts off from under $60 to nearly $80 p.b. -- AND -- the DJIA also soars to an all-time record high of 14,279 on October 9, 2007.
· From October 2007 to June 2008: Oil’s record winning streak goes unabated -- AND – the DJIA remains locked in a steady decline.
Bottom line: There is no consistent correlation between oil prices and stocks over time.
There is, however, a very real relationship between the Elliott Wave pattern unfolding on the price charts of oil AND the current upside explosion.
The best part is, in the June 6, 2008 Elliott Wave Theorist, EWI President and Theorist editor Bob Prechter himself presents four, jaw-dropping snapshots of Crude Oil alongside invaluable insight of the market’s likely long-term trend changes.
In Bob’s own words: “I am publishing this issue a bit early to alert you to an opportunity developing in the oil markets.” Get the full story today.
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Editor's Note: Starting at noon Wednesday, June 18, EWI is launching its celebrated Financial Forecast Service FREE WEEK. Meaning: Every Crude Oil price chart and original insight presented in our June publications of the Elliott Wave Financial Forcast AND Elliott Wave Theorist will be available at the unbelievable cost of $ZERO$. Sign up today at Club EWI to take advantage of this amazing offer.