Friday, October 2, 2009

Correlation Broken USD and SPY

I haven't been reading the blogs today, so if this information is "old news" forgive me.

Using EUR/USD as a proxy for USD strength, and correlating to SPY, you can see the correlation has been tight, but and episode last Friday and now today shows some sharp departures from that correlation. I still believe the dollar rallies from here....big daddy is still one....someone said....I hate the USD the worst, except for all the others.

But at the same time, equities tank. That causes and amplifies the flight to "big daddy". There were elements of fear lately. Many people know this is a house of cards.

Look at the lower links to longer time frame charts, the correlation has never been perfect and has often varied, so this is not perfect, but it's another straw placed on the camel's back.

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Insightful and Useful Comment!