OIL PRICE GAPPING – JUMP DISCONTINUITIES – THIS IS TRUE FEAR

When a price “gaps”, i.e. no meaningful traded prices or committed quotes across a wide price range, [or what quants/mathematicians call “jump discontinuities“], then you know that we are in the eye-of-the-storm. See the oil chart below for today.

So, the question arises“when do we know we are close to the bottom?” 

The simple answer is that we will not know immediately – it will take several attempts to keep taking the market lower. Only when sustained selling fails to have any further impact will we have a bottom – when people are exhausted and algorithms fail to impact prices. It may sound obvious, but when everyone is driven by fear, stating the obvious is a helpful way to restore sanity.