Duration Told Us And Symmetry Is Telling Us Oil Has Bottomed

Quotable

“Formula for success: rise early, work hard, strike oil.”

                                   J. Paul Getty

There are lots of decent rationales to suggest why oil prices have bottomed. Rising prices for Permian Basin drilling properties would be one. Inability of Iran to crank up production as fast as expected might be another. China’s latest stimulus might fit. But what got my attention a while back was the break of a major trend line coupled with our wave analysis. What added confidence to a longer term bullish view was duration and now chart symmetry suggests more to go on the upside.

Duration is a simple concept (not the fixed income type). And it’s easy to apply.If you can count, you can follow duration. No algorithm or fancy technical charting package needed. I started following duration years ago after reading an excellent book by Woody Dorsey, titled, Behavioral Trading. Besides being an incredible analyst, Mr. Dorsey is a gifted writer; you have to love a book when the title of the first page of introduction is this: “The History of Markets Is the History of Human Error.” 

“There are decisions in trend duration measurement that may seem equivocal….Mathematical models like econometrics are precise. But precision, while always presuming to be righteous, is not necessarily always the most useful. If we want to absorb the form or gestalt of the market, we may be willing to honor some abstraction over the ‘precise’ precision….Practical behavioral finance is not about mathematical models, which are the sole province of the purely rational.It is about unleashing the intelligence of our other brains and dancing to the music of the durations.”

Woody Dorsey

Simply put (and this will be clear in the chart oil prices below), in bear markets the duration of the moves lower in price will be consistently longer than the moves higher; thus, defining a bear market means the trend moves (lower) take more time than the corrections (higher).