John Murphy & Cftc

MARKET INDEXES BREAK MORE SUPPORT LEVELS AS VOLATILITY RISES -- SO DOES THE PUT/CALL RATIO -- RISING YEN SIGNALS MOVE TO LOWER RISK -- CRUDE OIL IS FALLING ALONG WITH STOCKS By John Murphy THE CFTC SHOULD STUDY SOME CHARTS... Given the close correlation between crude oil and the stock market this year, it's no surprise to see them falling together. The daily bars in Chart 7 shows crude oil falling $1.61 (-2.5%) today to break its 50-day average (blue circle) for the first time since early March. The solid line is the S&P 500. The close correlation between the two lines is obvious. Both bottomed together in March and peaked in mid-June. I point this out because of today's report that the CFTC in Washington is considering imposing tighter restrictions on commodity traders. The CFTC commissioner on CNBC today said he was particularly concerned that the recent runup in oil wasn't based on any fundamental rationale and may have been due to excessive speculation. Someone should show him this chart and explain that crude oil ran up with stocks on hopes for an economic recovery and are now falling together. It's truly scary to realize that people in Washington making market regulations don't understand how the markets work. The solid line in Chart 8 shows the Energy SPDR (XLE) dropping much harder than oil over the last month. The XLE/SPX ratio at the bottom of the chart show energy stocks leading the rest of the market lower. Apparently, traders in energy stocks saw the drop in energy coming a bit earlier than commodity traders. Someone should show that chart to the CFTC as well. Chart 7

Chart 8