Monthly Archives: November 2017

Oil update….

Whatever the market being traded, there always will be a a question being asked at one moment: How far can this thing go ? Clearly not an easy question to answer as this will invariably depends on factors that are partly unknown or difficult to estimate, such as fundamentals, market positioning or market risk amongst others. The first part is obviously to assess how atypical the move experienced in the given instrument is. This report aims to contribute to this.

The below chart shows the WTI Spot price over the period of January 1986 to October 2017 . On the 30 October 2017 it was trading around 54.11.

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In the below I plot the previous 125 days against other similar historical periods that would have closely matched the recent history. The data has been normalised so as to be on the same scale. The chart shows the latest 125 days in black, and overlay similar historical patterns in grey. It Also shows what has been the price path for the following 125 days as well as the observed quartiles.

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Finally I plot the last 125 days and a trend forecast derived from an ARIMA(0,1,0) model as well as the 95% confidence intervals. The ARIMA model is fitted to the past 625 historical values whilst ignoring the last 125 days, therefore we can look at the recent price path against the trend forecast and its confidence intervals to gauge how (a)typical the recent move has been.

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WTI Break Analysis…

In the following I us an R package BFAST designed to detect strucutural breaks in time series.The script Iteratively detects breaks in the seasonal and trend component of a time series. The first chart shows the various break and fitted regressions. The second chart shows the deviations from the regression lines and 95% interval of confidence. This could be used as an overbought/oversold indicator. Anyway, just work in progress…so any input / suggestions are always welcome as usual. Feel free to contact me

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Weekly Changes in G10 FX Trade Weighted Indices

I always liked boxplots. I think they provide a great and very visual way to position current data relative to their history whilst highlighting outliers. This is particularly useful as it helps to put recent moves in context of their past opportunities and possibly highly reversals and/or opportunities. To illustrate this I wrote a quick script in R to grab the BOE G10 Trade weighted indices from the website of the bank of England and posititon the most recent one week move relative to its history of weekly move going back to 1990.
The blue dots represent the most recent observations, the orange dots are the outliers over the period 1990 to date. The boxes emcompasses the observations that fall between the 25% and 75% quantiles. The Blue lines in the box are the median value over the sample and the “wiskers” represent an interval of close to 95%.

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