Chart of the Week: The Incredibly Boring Crude Oil Market

Remember the good old days when Crude was at $150, Saudi Princes were having Audis made out of Silver, and trader’s were storing oil on tankers to turn a profit…. Everyone had an opinion on where Oil prices were headed, with crazies throwing out $1,000 Oil and others saying there’s $75 of risk premium built into the price. Those were the good old days when Crude Oil stories read like the tabloids…

But fast forward a few years and Crude Oil has become…dare we say… boring.  Just take a look at the incredible shrinking range of Crude over the past 3.5 years to see what we mean.

Crude Weekly(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz.com

Crude had over a $100 point range in 2008, a $60 range in 2009, and about $40 in 2011. But since then it’s been smaller and smaller daily, weekly, and annual ranges for the poster child of commodities.  Just look at last year, where despite tensions tension’s in the Middle East last summer and a train holding thousands of gallons of oil derailing, the volatility in crude oil decreased by -18% {past performance is not necessarily indicative of future results}.

But here’s the thing, contracting volatility and decreasing ranges can be compared to a spring being coiled up (compressed), with only one way out – a fast, swift decompression. Is Crude Oil about to stop compressing and spring back into activity? Nobody knows for sure, but the chart is doing a little thing the technical analysis folks like to call a “pennant” chart pattern.

See how the triangle sort of looks like a baseball pennant (not that us Cubs fans in Chicago know much about what a pennant looks like outside of the one’s on the Wrigley scoreboard).

Cubs Pennant Flags

The “pennant” chart pattern is a triangle shaped pattern where prices continue to fit into the smaller and smaller range between the converging sides of the pennant, until…. they breakout to one side or the other. Now, those with more of a background in this sort of thing can debate where the flagpost is, whether this is a bull or bear pennant, and the rest. But for most trend followers, they don’t really care which way Crude Oil breaks from this pennant range – they just want it to break.  Some pennant formations can last days, and others can last multiple years (such as this one). But inevitably, as the range of the market continues to be constrained, a new breakout from that range will occur.

Here’s hoping…

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

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Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

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Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

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See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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