Back in March we layed out the bull and bear cases for Macau as it neared all time highs, and concluded the analysis saying that it looks unlikely that Macau stocks will go much higher until September at the earliest.

Now, as the Shanghai Composite Index is officially in a bear market, defined as 20% below its highs, Macau stocks are falling with the broader Chinese indexes. The VanEck Vectors Gaming ETF (BJK), mostly Macau stocks, is down over 4% year to date now, after being up about 8.6% as of May 2st. At best, I continue to believe that Macau will trade unpredictably up and down with no prevailing trend until this worsening trade war is worked out, and currency developments continue to unfold. More on that in a minute. The risks for a bearish downtrend are higher though than an uptrend from here as I see it.

Macau is basically following the Shanghai Composite Index more or less, though Macau has been a little bit stronger than the general Chinese stock market. This could be because there is still a lot of bearishness to work off after Macau stocks bottomed out along with oil. Which brings me to something of a strange correlation. Macau does seem to move in tandem, somewhat, with oil.

As you can see from the chart above comparing BJK with the US Oil ETF, Macau crashed from 2014 to 2016 almost in lockstep with the price of oil, bottomed along with oil, and then began climbing back up with oil. At first glance this seems strange, and maybe even counterintuitive. Usually, when commodities fall, stocks rise because the cost of doing business falls, beefing up profit margins and encouraging more consumption. So why would Macau have a correlation with oil?