Crude oil price has declined for last two months in large scale while the stock market look competitive in major stock indices.
Basically simply thinking, oil importer have benefit from the oil price down and exporter will suffer from it.
For example, US, UK and Japan has imported oil more than exporting, and they should have benefit from oil price down.
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| < Figure I > 75% of correlation |
However, looking at stock market, it seems that they have not always had the benefit.
Figure I shows 20yr historical values of Dow Jones industrial average [USD] and WTI Crude Oil price [USD]. The correlation of them is around
75%, which means the stock index and oil price are highly correlated each other.
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| < Figure II > 52% of correlation |
Figure II shows 20yr historical values of FTSE 100 [GBP] and WTI Crude Oil price [USD]. The correlation of them is around
52%. It is less than US market, but it could be said highly correlated.
Figure III shows 20yr historical values of NIKKEI 225 [JPY] and WTI Crude Oil price [USD]. Different from US and UK market, the correlation between the stock and oil price is around
-40%, which means the stock price tends to go up while the oil price goes down.
Observing WTI Crude Oil price, the largest declining has been occurred at Lehman crisis, and larger up & down for last 2-3 years.
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| < Figure III > -40% of correlation |
The point is whether current downward trend is just a part of up & down or beginning of oil crisis.
If the oil price is going down further, it concerns the stock indices which are highly correlated can be going down.
Even in Japanese stock market, the stock price has largely declined while the oil price is going down.
Global stock market has been volatile particularly for last a few months, and the oil price is remarkably going down. The low oil price bring benefit for oil importers but it may cause deflation in the market and this can be a downside factor in stock markets.
It will not wasted to re-balance risky portfolio into conservative now.
The trend and momentum indicates NZDCAD could turn into downward trend in a coming week targeting around 0.880 the lowest level for last two weeks.
GBPJPY had jumped in larger scale from the end of Nov to early Dec. It has gone down for the last week, and GBPJPY has reached the same level around the end of last month. The range for last two weeks was around 185 - 189, which is relatively wide range.
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Trend & Momentum
indicators are represented in four types of signals, which are Upward (Steep), Upward
(Flat), Downward (Flat) and Downward (Steep).
However, the most major indices, FTSE 100 and Dow Jones Industrial Average, are described with triple top for last 18 years. Applied trend & momentum fitting, the right figure implies somehow market cycle is observed and the current market seems be near the top of a cycle.
The latest trend & momentum indicates EURAUD is turning into downward trend gradually in next one week, targeting around the range 1.42 - 1.43.
Nikkei 225 index had gone up both in JPY and USD that time.
This implies that the market jump in 2013 has economic growth or expectation but the jump since last Oct is caused by FX effect in USDJPY. While Nikkei 225 is going up in JPY, USDJPY is going down to offset the value in USD.
Another example is S&P ASX 200 in Australian stock market. Most of the period since 2004, correlation between the index in AUD and USD is higher except for the period from 2013 to early 2014. RBA had cut Australian interest rate since 2012 to 2013, and AUDUSD had gone down.
Looking at the stock index, value in AUD had gone up in stable pace during 2012 to 2013 while value in USD had moved in more volatile pace. The correlation between value in AUD and USD has 
AUD has been stronger than major currencies, USD, EUR, GBP or JPY for last one week. NZD has been stronger as well as AUD.
Needless to say, now global economy is facing the most difficult situation in the history. Central banks in major economic zone, such as US, UK, Eurozone and Japan, have kept interest rate at record low level for long time since Lehman crisis 2008. Not limited to monetary policy, they also brought Quantitative Easing (QE), buying risky assets in the market.
USD has been stronger against most of major currencies, EUR, GBP, AUD and particularly JPY due to BOJ announced additional QE since end of last month. Japanese stock market also has shot up.
This QE may have aspect of JPY devaluation. They plan to increase their exposure of ETF and J-REIT in three times scaled pace. Simply say, if they are buying less credit asset by their JPY, value of JPY will be degraded and cross currency against JPY will be relatively going up.
EURCAD had gone up around middle of Oct, and it has fallen down in the week after that. The Trend & Momentum indicates EURCAD is going up in a coming week toward the highest level for last 2 weeks.
EURGBP has risen since beginning of this October, and it had been slightly in downward trend for a week around the end of last September.
AUDCAD has been declined for last 2 weeks.Trend and Momentum indicator shows AUDCAD is expected to be bounce up in a coming week, but downward risk remains toward later.
