Oil up nearly 5%, stocks flat
The story in 2016 so far has been the tight correlation in oil and risk trades. Worries about global growth have dominated. Fear about oil oversupply spilling over into defaults and pain in the financial system caused a drop in stock markets.
As oil went, so did the stock market -- at least until the past two days. Note how oil (shown on the chart in orange) has surged over the past two days but the stock market has flattened out.
Be careful when a divergence breaks down. It could mean a squeeze is the driver in oil, not fundamentals. It could mean that fear of a financial spillover is a non-issue with oil anywhere above $35. It could mean nothing.
But when correlations change, it's a sign to be on guard.
