The current market environment is certainly unique in many aspects, whether it be the unrelenting uptrend in US equities or the extremely low volatility across asset classes, this market is clearly a different animal than anything investors have seen before. Some of the recent action in West Texas Intermediate crude oil is yet another example of this market environment turning correlations on their heads and doing whatever it likes:

Click to enlarge

WTI_correlations

At the top of the chart is the rolling 20-day correlation between crude oil and the S&P 500, these two assets have never been as negatively correlated as they have been during the last 20 days. On the bottom of the chart is the rolling 20-day correlation between crude oil and energy stocks (once again, this relationship recently reached a negative extreme).

The good news for crude bulls is that historically when these correlations become extremely negative, crude is often on the verge of putting in a short term bottom. However, bearish seasonality during the months of October & November should quickly mute any optimism regarding any near term upside for crude prices:

Crude_Seasonal_28_years