The Oil Bears Are Running Rampant... Should They Be?

Oil prices have hit three-month lows and there is more pressure on the commodity over concerns that the Coronavirus will slow economic activity in China and therefore reduce demand for oil.

But... We wonder if the selloff hasn't been overdone. One of the tools we use to monitor trading is the Markov Process - it sends bull/bear signals after looking at returns and volatility over a long period of time. As you can see from the chart below, our rendering of the Markov process showed increasing bearish signs toward the end of last year. And while the big oil selloff has been going on, Markov, while not going bullish, isn't as solidly bearish as it was before. Some weak bull signals are starting to show up.

Worth keeping a close eye on!