This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bet on Oil, Stocks Moving in Lockstep

NEW YORK (TheStreet) -- There's been an inverse correlation working between the oil market and the stock market. Oil goes up and stocks come down. To the uninitiated, this would seem to make a lot of intuitive sense. After all, 48% of all the stocks on the NYSE are either directly related to oil or have energy as their primary input cost. Of course, it makes total sense that high oil prices would negatively affect stocks.

But the reality is that this is not the way it has been working.

In fact, over the last several years, oil and stocks have been moving in tandem, so closely that if you put up a daily chart of oil next to a daily chart of the S&P 500 without labels, you'd be hard pressed to tell them apart (see chart below).

As I outline in my upcoming book, Oil's Endless Bid due out from John Wiley and Sons in a few weeks, oil has become "just" another asset class, moved primarily by the amount of capital flowing into and out of it. In this way, it has mirrored the motion of stocks: As money looks to invest, it flows into oil just as easily as it flows into equities.

But recently, with oil moving decisively over $100 a barrel, oil has worked as it has intended, as a hard asset hedge against other paper assets and as a diversifier from more traditional investment in stocks and bonds.

But my guess is this inverse relationship just won't hold.

Oil Prices and Stocks Will Rally: Analyst

We've seen a lot of hand wringing about the negative impact that over $100 oil prices will have on the recovery and the economy at large. An equal amount of speculation as has gone into oil has been spent on the television trying to come up with an oil price where the economy is entirely derailed, we sink back into recession, the recovery stalls and, I suppose, the world ceases to spin.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,107.53 +55.80 0.33%
S&P 500 1,979.71 +6.08 0.31%
NASDAQ 4,443.7210 +19.0170 0.43%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs