Does Nifty Care about Oil Prices?
5 Oct 2021 ● 02:38 PM
I say No! and I say so for the 100th time.
I say it with this chart because it speaks more than words. The vertical lines show all the bottoms in Oil and it should not surprise you that equities bottom along with Oil. After all, if the job of equities is to beat inflation this is what they should do, rise more than Oil when it goes up. A good market is one where rising prices are passed on and absorbed by the economy. If true then this is not stagflation but growth+inflation which is very bullish for equities. Thus rising oil prices end up reflecting the economy just like copper does at times. call it Dr. Copper or Dr. Oil. So if you watched Oil prices explode to new highs and a news headline read 'markets worried about rising Oil', or 'rising Oil may put a cap on the market', think again. The authors of such articles are day traders, day journalists reacting to the day's market action and deciding to explain why it went down today. but the lack of historical perspective is obvious from the simple chart below of just the last few years of market action. Your actions should have been to consider such a market dip a head fake and a buy the dip opportunity. Fighting the headlines is not easy but once you understand inter-market analysis the headlines will fade and you will be fighting everyone else. Like I do.
So what did last week's Oil rally tell me?
'Teji Barkara Hai'