Posted by: jhamon | June 30, 2009

Lately, S&P 500 Index Tracks Consumer Confidence

After I posted my comments about the consumer confidence numbers, MysteryHedgie sent me this.  (He’s a macro guy who’s always looking at correlations and opportunities arising therefrom):

Consumer confidence has tracked stock prices quite closely since the peak in late 2007 (see below).

This morning’s unexpectedly soft reading accompanied by soft oil and gold and a firmer US$ have stopped the “reflation breakout”, focusing traders and investors on the weakened state of global demand, highlighted by China’s stated intention to slow purchases of base metals.  Whether stocks, commodities, interest rates and FX are retreating into their familiar 2 month ranges or are going to correct more deeply will depend on Thursday’s US Employment report.

Either way, the price of risk measured by VIX, WVOL, and oil options is very reasonable; consider derivative protection or “cash” substitution trades;  July promises to be bumpier than May and June.  [Ed.: S&P 500 orange,  Consumer Confidence white)

Correlation Between Consumer Confidence and SPX Quite High

Correlation Between Consumer Confidence and SPX Quite High

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