The VIX has traveled much deeper than what I was expecting. I’m looking for a bullish reversal which will spring the trap on the unsuspecting VIX bears. In the last month, the VIX bottomed 3 times which could be a signal that tells us that the VIX decline has had enough.
When the VIX moves it can be very violent as tons of buy stops will get hit until the 4th wave top. On this 90 day chart, the golden cross has just formed so a rally will stop the VIX from creating a death cross. You can call this bottom a double H&S pattern and even add the falling wedge for good luck.
I’m looking for a big bullish move with the VIX and soar well off the top of the chart.
The commercial hedgers are stacked to the long side by a ratio of about 2.4:1 and as usual, the speculators have taken the opposite position. Both can’t be right in their direction and violence will ensue (Increase in Volatility), once this skewed trade starts to unwind.
This is the June contract month and from the recent late 2018 bottom, crude oil looks like it wants to soar. This may happen in the short term but the commercial trader’s positions do not support a major bull market to continue in oil. If the COT report showed that commercials are adding many long positions, then I would think otherwise.
World growth is slowing down and the oil trade wars are not going away as well. Crude oil has been in a bear market since July 2008. Oil has tried to break out two major times and each time it failed to get its mojo back. The big question is if the 2016 low was the real bull market low, or will oil crash to new record lows again. A complete retracement would sure confirm that our recent bearish rally has the oil bulls in a bull trap.
This could take the rest of the year to play out so don’t expect anything to happen just yet.
The Gold/Oil ratio became a bit more expensive in the last few weeks or so as it was 22.8:1 today as I post. Now if this same ratio were heading to 30:1 or more then chances are good I would be very bullish on crude oil.
Switching oil to a Cycle degree triangle may only last until the digital paint has dried. March is also a good month for reversals so we just have to have the patience, to see if the oil bear is going to attack again.