Crude oil, stocks, and yields have experienced a high degree of correlation over the past few months. All three peaked together near the end of September and all three bottomed together near Christmas.
Divergence Sets In
This month a big divergence is taking place.
The chart above shows that crude oil and the S&P 500 have created a series of higher lows, while yields have created a series of lower highs.
One of the largest divergences in a year is taking place as the month of March comes to an end.
Most likely, a game of “catch up” needs to take place, as the spread has become rather large. Stocks and crude will chase yields lower or yields will rally to move closer to rising crude and stock prices.
Watch these support and resistance lines for clues to the upcoming game of “catch up”.