Is Iron Ore Weighing Down Stock Market?

By Tom McClellan

Iron ore prices versus SP500
April 20, 2017

Some U.S. stock market investors are getting worried about the price of iron ore in China.  This week’s chart helps to show why.

One analyst who noticed this relationship was Alastair Williamson of Stock Board Asset, who published this Tweet on April 18, 2017:

StockBoardAsset tweet

It is definitely an intriguing chart, and a relationship I had not explored before.  I have come across a large number of interesting intermarket relationships like this one, and it is always fun to find (or be shown) a new one.  But not all of them have merit.  So what I’d like to do is use this one to show you how I typically like to contemplate a new relationship that I encounter.

So my first question is about whether the relationship is a durable one.  The answer, it turns out in this case, is no.  The two have only recently fallen into this apparent correlation.  Here is a longer term look:

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