This is a 2000 tick chart of Crude Oil with the E Mini SP 500 overlayed in Purple on it. Can anyone looking at this tell me this chart pattern is literally not exactly the same? The only even minor difference I can see is that at the highest high here the E Mini SP 500 did not make a new high there, so it diverged from Crude slighly there. Other than that these markets could be swapped. Why do I display this?
I harp constantly on monitoring risk and making sure when you trade that you take into account correlations in markets so that you do not have too high of a risk % in any one trade. In these absolutely ass backwards markets we have right now, there are correlations that have never before been in place, that are very tight now. As much as they make no sense whatsoever, they need to be honored until they decouple. If you want to short Crude Oil you sure as hell better not do it when a big stock market rally is happening as you can see right here.
If you look across the board, these types of correlations are everywhere. For me now if I want to trade alot of different markets, I need to be very careful about position size. I like to risk 2% of my account per trade, but if I take 5 trades now that can become 10% really quickly if I am not careful about these correlated markets. Almost all commodities are directly correlated to stocks right now except the Softs and Natural Gas. This is the case with currency markets as well. Just be aware of this when making your trading decisions, I have no idea when this will end.
Ironically, the Dollar is not up much as I type this, with the Dow - 160 so that has been a pretty tight inverse correlation lately, of course also making no sense at all. The Short setup for the dollar I posted yesterday was not filled, I have orders in again today to sell below yesterdays low. It does not appear right now that order will be filled but who knows. If the stock market were to rally here intraday, the DX could tumble. The fact that it is not up much may be telling us this stock dip is a buy intraday, it should be up quite a bit more.
I also have some sell orders in the Grains and those markets are not open yet. Bean Oil in particular I think is in an area to look for a short sale.