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Old 05-31-2009
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Default A simple but effective way to gauge the global economy and mkts.

There's a simple method we used while trading that might help some here who trade. This might be an oversimplification, but you'd be surprised to find how well this works.

Ready?

Look at oil prices. You don't even have to look at the crude oil, just look at the prices at the pumps. This is only but one indicator to look at, but as goes the price of oil, the mkts will follow.

You can do some research on it, but trust me, when oil goes down, so does the economy, and vice versa.

Within the last 2 months, I have seen gas prices go from $1.70's to now over $2.20. This is in NJ, but overlay that chart and you will see oil bottomed out in Feb and the mkt bottomed out in March. Watch for the timing as oil will move before the mkts most of the time.

If you want two tickers as a proxy, try comparing USO and SPY on google finance charts.

GL!
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Disclaimer: This should NOT be your ONLY indicator. Use it along with others to get confirmation of what you think you're seeing in the mkts.
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"This might be an oversimplification"
That may be an understatement. Hindsight is a wonderful thing, its easy to point out the relationships on a graph of past prices. Far more difficult to do it with future prices.
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Quote:
Originally Posted by boondoggle View Post
"This might be an oversimplification"
That may be an understatement. Hindsight is a wonderful thing, its easy to point out the relationships on a graph of past prices. Far more difficult to do it with future prices.
LOL - my comment says "might" and yours says "may".

Point taken, as mentioned, it's just but one indicator a trader should look at. Of course anyone can point to charts and make a case for one instance. However, my main point was that oil does correlate closely to the global economic conditions and therefore the financial mkts as well. We could start an advance discussion of all the other factors, but who wants to read about LIBOR rates, yield curves and et al...?

BUT, you are correct, there's no free lunch in trading (or in most places for that matter).
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