World Financial 2014-2016 Market Bubbles: Oil Negative - US Dollar Positive

TL;DR

This paper detects negative oil market bubbles and positive commodity currency bubbles from 2014-2016 using LPPL methodology, revealing strong anti-correlation and providing a successful forecast of market trends.

Contribution

It applies the LPPL method with a universal scaling factor to identify and analyze market bubbles and anti-correlated dynamics in oil and currency markets during 2014-2016.

Findings

Detection of a negative oil bubble in 2014-2016.

Identification of a positive USD-related currency bubble.

Successful market trend forecast at FENS 2015.

Abstract

Based on the Log-Periodic Power Law (LPPL) methodology, with the universal preferred scaling factor $\lambda \approx 2$, the negative bubble on the oil market in 2014-2016 has been detected. Over the same period a positive bubble on the so called commodity currencies expressed in terms of the US dollar appears to take place with the oscillation pattern which largely is mirror reflected relative to oil price oscillation pattern. This documents recent strong anti-correlation between the dynamics of the oil price and of the USD. A related forecast made at the time of FENS 2015 conference (beginning of November) turned out to be quite satisfactory. These findings provide also further indication that such a log-periodically accelerating down-trend signals termination of the corresponding decreases.