Equity markets have taken a hit while oil prices have suffered much less. The trend in oil is negative and the CL contract is neither rich nor cheap verses its primary anchor. If we can find a reason to buy an equity index then we have a trade.
First let’s look at EMD. It is oversold (yes that matters for an equity index) and its bullish trend is fragile but intact:
If we look at the two contracts together we can see how oil has outperformed:
The correlation is reliably positive. It has dropped below zero three times in 3 years. If the spread moves out more, I would add to the trade (first executed on Friday shortly after the open).
