OIL - Still Low Volatility, Waiting For Positive Leverage Effect

5 Eki 2020

OIL - Still Low Volatility, Waiting For Positive Leverage Effect

Holding an overall investment the Asset Value at Risk is the worst scenario the price can reach, the worst loss at normal market conditions, before to consider managing the investment into the Balanced Portfolio of Uncorrelated Streams.

Details on the chart.

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Educational Details

Modern Portfolio Theory (some "Stylized Facts of Asset Returns" )

- Value at Risk is a measure of the risk of loss for investments, given normal market conditions, in a period. It measures and quantifies the level of financial risk. The Asset VaR Breach occurs when a loss exceeds the VaR threshold. Knowing VaR modeling, it is possible to determine the amount of a potential loss that can occur. At the VaR Breach that investment has reached its worst scenario. Then, it can be the case to manage that investment into the balanced portfolio.

- Asset Returns (Simple, Simple %, Logarithmic) highlight Outliers and Volatility Clusters of Asset Returns.

- Rolling Standard Deviation as a Non-Gaussian Distribution of Returns, correlated to Price Curve or Asset Returns, highlights Leverage Effect, Skewness, and Kurtosis of the Returns.

- Leptokurtic Pivots highlight the incidence of Outliers in long and fat tails of a Non-Gaussian Distribution of Asset Returns. This means that Anomalies (Outliers) describe conditions from which Asset Returns exceed the Probability Density Area. Then, the Asset shows an induced behavior. This is not going to persist and it carries a high risk of trading. But it can define the Price Strength. Then, it can set up the next steps of Trend Momentum and Trend Waves.

- Platykurtosis is a condition where Asset Returns are inside the Probability Density Area. This means that there are not Anomalies (Outliers) and the Non-Gaussian Distribution of Asset Returns show short and tails. Then, the price behavior is proceeding without induced actions. This gives an acceptable or low risk of trading for the purpose to enter the market.


Glossary of Wyckoff Terms

- Climactic Point (Climax, Buying Climax, Selling Climax): the peak, the extreme or the end of something and as the point of the highest dramatic tension or a major turning point in the action. Some synonyms are top, pinnacle, height, maximum, consummation, culmination or turn of the tide. What does a climax do? A climax stops a trend either temporarily or permanently depending on the subsequent action. A climax is preceded by some sort of trend.

- Reaction Wave (Automatic Rally, Automatic Reaction): the Climactic Point is caused by a panicky action, like a panicky liquidation, a panicky selling, that under extend the price, so as by the over extended price that has exhausted its supporting demand. The price is driven too far and this creates a vacuum. As soon as the extended price has been stopped the financial instrument should begin to reverse shortening the bullish or bearish thrust. The Reaction Wave is marked as Automatic (Automatic Rally, Automatic Reaction) because it occurs in a systemic way, after the Climactic Point.

- Creek: relates to the flow of supply across the top of the trading range. The creek itself is a wiggly, squiggly trend line drawn free hand through the tops of the rallies within that trading range.

- Ice: The ice is the former support area at the bottom of the trading area which becomes a supply area. The ice is shown by drawing a wiggly trend line across the various support points at the bottom of the range. In a manner similar to the creek which is drawn through the supply points at the tops of the rallies in the Trading Range.

- Spring: A spring is a refinement of Mr. Wyckoff‘ s concept of a Terminal Shake-Out and grew out of that concept. A spring is a penetration below a previous support area which enables one to judge that quality and quantity of that supply on that penetration. The critical thing that is shown by the Spring or the Terminal Shakeout is the amount of Supply that comes out on the drive to new low ground and how well that Supply Distribution is Absorbed. Remember this vital point, it is important. The main difference between the spring and the terminal shake-out is how far it penetrates into the new low ground.

- Upthrust: It is a sharp price movement above a prior supply level which does not hold, but immediately reacts below that previous level. Usually, on the Upthrust, the spread will be narrow and the volume will be increased, this is evidence of the supply overcoming demand. The volume, the supply has increased in strength relative to demand. If the volume doubles the price progress should be double and when it does not the inference may be drawn that the Supply is Overcoming the Demand. The confirmation that it is an Upthrust is in the promptness and in the manner in which it reacts, it should react promptly to show that the attempt to leave the Trading Range on the Upside has failed and generally it will react with either a lack of demand or with the pressure of supply coming in on the downside. The Upthrust itself is the Sign Of Weakness and the Last Point Of Supply all in the same action. It is normally followed by a more important Sign Of Weakness and a Last Point Of Supply.

- Upthrust After Distribution: It is a special type of distribution in which the stock goes up! A Stop that is going up builds a cause and then tries to leave that Trading Range on the upside, fails and then begins the downtrend. In applying the rules you must use some judgment and some flexibility. The Upthrust After Distribution is a special market phenomenon or a principle which Mr. Robert Evans defined through his Wyckoff studies. When it does occur the Upthrust after Distribution can be an extremely helpful and profitable tool. After a financial instrument has moved up, it has Climaxed, it has then moved laterally and built a potential cause and is then moved into new high ground on an increase in volume and a relative narrowing of the spread to then return to the average level of closes, would indicate that the entire lateral level was not accumulation, but was distribution instead.

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Thank you
Girolamo Aloe

Disclaimer
Nobody in Girolamo Aloe's profile is a Financial Advisor and nothing herein is intended to be constructed as Financial Advice. Every content is for information and educational purposes only. Trading carries high risk. You should not invest money that you cannot afford to lose. Past performance is not an indication of future results.