Saturday, July 19, 2008

Oil Volatility and Market Psychology Perspectives for a Weekend

* Illusion of Volatility? - Just at the time the CBOE rolls out a VIX for the oil market, we seem to be getting quite a bit of volatility in the price of a barrel of crude. Interestingly, however, my look at the 20-day moving average of daily price volatility in West Texas Intermediate crude suggests that current volatility is only modestly above average for the period 1984 - present. The reason for this? You can see the breathtaking rise in crude prices since 2002. A 2% move in crude prior to that time was a move of 40 cents or so. Now, a 2% move is over $2.50. In percentage terms, the latest series of moves in the oil market have not been unusually volatile. But we are anchored to the prices of a bygone era, and that makes the changes at the pump--and in the pits--seem quite extreme.

* Evolving Market - Great historical study of how price patterns evolve over time in the stock market.

* Extreme Negative Sentiment This Past Week - Interesting observations from Richard Peterson's blog, which covers both trader and market psychology.

* Hope Comes at a Cost - Excellent review of research from CXO Advisory on how active trading strategies lower average market returns.

* When Markets Rise on High Volume - Quantifiable Edges finds a worthwhile edge.

* Thanks - For the continued positive comments on the Twitter posts, which have expanded to include links to key market themes, summary of market indicators, upcoming economic reports, and occasional market observations.


nEveR bORn...NevER diED. said...

Kevin said...

When Markets Rise on High Volume - Quantifiable Edges finds a worthwhile edge.

Thanks for the introduction to Quantifiable Edges. Good stuff.