Correlation Trader vs. Signal Trader

Crude Oil Correlation vs AUD/JPY & AUD/USD

Crude Oil Signals

Correlations only work until they don't. Friday, we saw Crude Oil get crushed. I made the mistake of basing my trades off the correlation of AUD/USD, AUD/JPY vs Crude Oil. This trade idea may work on a longer term basis(several Days), but I am a Day Trader, and I need to stick to what works for me, and right now, trading signals on a minute to minute basis and using stops has been working fabulously.

Correlation Trader vs. Signal Trader

Crude Oil Correlation vs AUD/JPY & AUD/USD

Crude Oil Signals

Correlations only work until they don't. Friday, we saw Crude Oil get crushed. I made the mistake of basing my trades off the correlation of AUD/USD, AUD/JPY vs Crude Oil. This trade idea may work on a longer term basis(several Days), but I am a Day Trader, and I need to stick to what works for me, and right now, trading signals on a minute to minute basis and using stops has been working fabulously.

Crude Oil Intermarket Correlation vs AUD.JPY & Intraday Trend Analysis

As you can see from the charts, Crude Oil and the AUD/JPY have been highly correlated as of late. We see Crude as a buy when it is oversold relative to AUD/JPY and Crude as a sell when overbought relative to AUD/JPY.

In this chart you can see how AUD/USD put in a higher low when AUD/JPY & Crude Oil were putting in a low for the day, suggesting a bullish divergence.

A common theme intraday for Crude Oil has been a second initiation in buying/selling in the direction of VWAP around 1 to 1:30pm EST, with a close near the low/high of day.(Please note my charts are Pacific time- Add 3hrs for EST)

Crude Oil Intermarket Correlation vs AUD.JPY & Intraday Trend Analysis

As you can see from the charts, Crude Oil and the AUD/JPY have been highly correlated as of late. We see Crude as a buy when it is oversold relative to AUD/JPY and Crude as a sell when overbought relative to AUD/JPY.

In this chart you can see how AUD/USD put in a higher low when AUD/JPY & Crude Oil were putting in a low for the day, suggesting a bullish divergence.

A common theme intraday for Crude Oil has been a second initiation in buying/selling in the direction of VWAP around 1 to 1:30pm EST, with a close near the low/high of day.(Please note my charts are Pacific time- Add 3hrs for EST)

AUD/JPY Carry Trade and SP500 Correlation

There is a high correlation between the SP500 and AUD/JPY and also AUD/USD.
This chart shows SPY(SP500 vs AUD/JPY)

Australia's elections over the weekend has resulted in hung parliament, which will take some time to resolve once all the votes are counted. With Issues in Australia over elections we might see AUD/JPY selling (risk aversion/unwinding carry trade) and this will help the bears bring the SP500 down. We are also seeing continued strength in the USD/JPY and Treasuries which has caused weakness in Crude Oil and Copper due to the inverse correlation relationship. (Crude Oil and Metals like copper have high correlation to AUD/USD, CAD/USD, and NZD/USD).

The bear scenario for next week-
SELLING IN-AUD/JPY, CAD/JPY SP500, Crude Oil, and Copper
BUYING IN- JPY vs all currencies, 30yr bonds, and VIX

Here are some old Intermarket Correlation resources from ForexAutomaton the period 2002-2008-

Here are some links that look at Currency Correlation of the AUD/JPY vs SP500 and the current state of 30 year treasuries-

aud vs jpy

Presenting The New Correlation Regime: Treasury Butterflies And Risk | zero hedge

Visualizing The Past Of The Treasury Yield Curve, And Deconstructing The Great Confusion Surrounding Its Future | zero hedge

Will Tonight's AUD Slide Be The Start Of Another Major Market Selloff? | zero hedge

HomeTrader: SP500 update and AUDJPY , AUDCAD and EURUSD.

Lessons from the Pros - 06/15/2010 Issue - Stocks Article: Money for Leads?

ES-AUDJPY "Swiss Watch" Recoupling Means Money In The Bank For Divergence Chasers | zero hedge

... from IDEAtrader Suite

The Rational Move

News | Currency Trading News | Currency Quotes | Commentary | Analysts - FX 360>

Dollar Soars As S&P500 Hits 5 Year Lows - Forex Analysis, Currency Forecast, FX Trading Signal - Action Forex

The Strongest Forex Correlations | Kathy Lien | FX360.com

Commodity Currencies & SPX | Samadhi Research Investments

Forex @ DailyFX - Currency Correlations Tighten Through Risk and Dollar-Based Foundations

Unwinding Of The AUD/JPY And Other Carry Trades Is Going To Take BHP Billiton Ever Lower - theyenguy -- Seeking Alpha

Chronic Deflation Will Send 30-Year Treasuries to 3% (Gary Shilling)

Australia election results point to hung parliament | World news | guardian.co.uk

AUD/JPY Carry Trade and SP500 Correlation

There is a high correlation between the SP500 and AUD/JPY and also AUD/USD.
This chart shows SPY(SP500 vs AUD/JPY)

Australia's elections over the weekend has resulted in hung parliament, which will take some time to resolve once all the votes are counted. With Issues in Australia over elections we might see AUD/JPY selling (risk aversion/unwinding carry trade) and this will help the bears bring the SP500 down. We are also seeing continued strength in the USD/JPY and Treasuries which has caused weakness in Crude Oil and Copper due to the inverse correlation relationship. (Crude Oil and Metals like copper have high correlation to AUD/USD, CAD/USD, and NZD/USD).

The bear scenario for next week-
SELLING IN-AUD/JPY, CAD/JPY SP500, Crude Oil, and Copper
BUYING IN- JPY vs all currencies, 30yr bonds, and VIX

Here are some old Intermarket Correlation resources from ForexAutomaton the period 2002-2008-

Here are some links that look at Currency Correlation of the AUD/JPY vs SP500 and the current state of 30 year treasuries-

aud vs jpy

Presenting The New Correlation Regime: Treasury Butterflies And Risk | zero hedge

Visualizing The Past Of The Treasury Yield Curve, And Deconstructing The Great Confusion Surrounding Its Future | zero hedge

Will Tonight's AUD Slide Be The Start Of Another Major Market Selloff? | zero hedge

HomeTrader: SP500 update and AUDJPY , AUDCAD and EURUSD.

Lessons from the Pros - 06/15/2010 Issue - Stocks Article: Money for Leads?

ES-AUDJPY "Swiss Watch" Recoupling Means Money In The Bank For Divergence Chasers | zero hedge

... from IDEAtrader Suite

The Rational Move

News | Currency Trading News | Currency Quotes | Commentary | Analysts - FX 360>

Dollar Soars As S&P500 Hits 5 Year Lows - Forex Analysis, Currency Forecast, FX Trading Signal - Action Forex

The Strongest Forex Correlations | Kathy Lien | FX360.com

Commodity Currencies & SPX | Samadhi Research Investments

Forex @ DailyFX - Currency Correlations Tighten Through Risk and Dollar-Based Foundations

Unwinding Of The AUD/JPY And Other Carry Trades Is Going To Take BHP Billiton Ever Lower - theyenguy -- Seeking Alpha

Chronic Deflation Will Send 30-Year Treasuries to 3% (Gary Shilling)

Australia election results point to hung parliament | World news | guardian.co.uk