Why Oil Only Gets a Vote on the Big Moves
Crude oil is unusual among the signals on this page because it only enters the regime read when it moves a lot, typically beyond 3% in a single session. Smaller moves get treated as quiet, even though oil has plenty of daily volatility on its own. That's a deliberate choice, and the reasoning is worth spelling out.
Oil prices bounce around constantly on inventory reports, OPEC chatter, and regional supply hiccups that have nothing to do with the broader macro picture. Most of that noise doesn't tell you anything useful about whether investors are favoring risk or safety more broadly. Treating every 1% oil wiggle as a meaningful signal would add noise to the regime read, not clarity.
A genuinely large move is a different story. A sharp spike, often tied to a real supply shock, a Middle East flashpoint, or an unexpected OPEC decision, tends to reintroduce inflation risk into the conversation. Higher energy costs feed into consumer prices and corporate input costs, which can complicate the picture for both the Fed and equity valuations, even if nothing else in the market has changed. That's why a big spike gets weighted as risk-off, on the logic that inflation risk creeping back in is unwelcome news for markets pricing in easier conditions ahead.
A sharp drop is treated slightly differently, and more mildly. A big decline can reflect genuine demand destruction, which is its own warning sign about the health of the global economy, but it can also just reflect a supply glut that has little bearing on demand. The regime read weighs a sharp drop as a smaller risk-off signal than a spike, reflecting that ambiguity.
The 3% bar exists specifically so oil doesn't drown out the signals that are more reliably informative on an ordinary day.