Oil

In my limited activity on twitter this week, I noted a critical juncture in oil volatility.   Heck, when oil had a bid pre-market yesterday, I even made a bold call to push long oil bets.  Well, so far that's been wrong as those gains were immediately reversed.  Frankly, it unearthed a flaw in my thinking and led me back to a famous quote.

'We can't predict, but we can prepare' - Howard Marks

First, let's dig into the whole psychology of this.  

It's largely dumb to try to find market turning points and it can be VERY expensive to not at least wait for a sign of reversal.  From a pure price standpoint (oil testing the major spring low area), this is one of those times where the reward seems worth that risk.  At the same time, the under-appreciated reality of execution errors can't easily be quantified.  That leads into the importance of understanding yourself.  Can you handle that volatility and uncertainty and build that into a plan where you will have an appropriate stopping point?  That's not a question that can be answered until you've been in high stress situations time and again.  

That's pretty complex isn't it?  Yeah, it's better to just wait for a reversal first, even though psychologically it may seem we're 'missing out' on more profit opportunity.

Moving to the charts...

Let's look at the chart of Oil's VIX, OVX.

This is just a monster area for oil as it now dips below the spring lows.  There is plenty of resistance here in OVX, suggesting a key psychological turning point is around the corner.  

The next few days will be damn interesting in this space.  Keep an eye out!

Trade 'em well!