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Category Archives: OVX

OVX: CBOE Crude Oil Volatility Index (INDEX)

 

Terror has struck the Oil markets as crude oil plunges and OVX soars!  This OVX also is tied to the USO oil fund, so looking at the OVX will shed some more light on how deep the oil crash can still go.  The maximum spike to the upside registered about 95 in this chart.  Following the spike, OVX crashed and has now worked its way back up, to the point where stiff resistance can occur. We are presently at about 65, with the 80 price level coming up fast.

The chances that the OVX can make a double top are good right now, but 100 would run into my top trend line, adding another roadblock for the OVX in the near-term.

When it comes to fear moves, they all come to an end sooner or later as fear levels can’t be maintained forever. WTI crude oil has crashed and now has a Gold/Oil ratio of 24.25:1, which is so far the cheapest ratio I have measured during all of 2018! If the Gold/Oil ratio is going to hit 30:1, this would push crude oil to the extreme side.

Once this fear gauge reverses then chances are good another spike to the downside will occur, but it will take its sweet time about it. Any bearish scenario will have to show a correction of some type if the OVX is going to make another dash to a new record high. Only time can clear this up, but the Christmas holiday season can make for some stunning reversals.

Combine, the trade wars, with congested pipelines that can’t move the oil fast enough, this makes for a very distorted fundamental picture. Besides that, President Trump has been trying to crash the oil price for months as well.

In the long term, world economies are going to fail in spectacular fashion like Venezuela that has a million percent inflation rate, created by 2 dictators. The biggest bubbles and the number of different bubbles come from China, which makes North America look pretty tame in comparison.

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OVX, CBOE Crude Oil Volatility Index (INDEX)

Today, Crude oil topped out and then instantly backed off again. Since we could be heading into an oil correction bigger and longer than the bulls expect, then this OVX index should soar. I’m sure the OVX will crash through 14, but it may not do it on this trip. Any oil bear market should push this index higher, with major resistance at 80-89. I can’t help but use a few Fibonacci whole numbers, which are very close to resistance patterns as well. The low was 17.24 ending with a nice spike, so we want this number to hold.

When oil declines much more and we get a decent corrective pattern, then this OVX index, should develop a 3 wave bullish move. Many of these spikes can be ignored, but they sure help in seeing the huge triple top. The same top line also shows a big H&S pattern, with the potential of another one coming up. This is all speculation before it happens, but it must be done if we are to confirm a bottom in the next bearish crude oil cycle.

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OVX, CBOE Crude Oil Volatility Index (INDEX)

I rarely look at the crude oil volatility index, but I may start to use the OVX a little more frequently. The idea is the same as any other volatility index, but it is strictly related to crude oil.  Any potential future move down in the index, would indicate a bullish phase in oil is coming. The reverse would be true if we think an upward spike in the OVX is going to happen.

We can see the recent wild spike to the upside, and then a reversal and a crash to about a 4 year low. At this time we are sitting at the 21.32 price level, and any further upside would indicate that oil is going to have a bearish move, or bull market correction. At 14 we have a huge double bottom, but if this oil bull market is going to persist, then the OVX should crash well below the 2014 low.

I would just be guessing as to how low the OVX will eventually end up, at the peak of the next big oil bullish run. I love even Fibonacci numbers and at 21,  we are dead on to a Fibonacci. 13, 8, and 5 would be the next logical sequence lows, but how long that will take could be several years or more.

The oil bull market is not over, as chances are good that oil is heading into another correction. Last week saw a huge move in gold, silver and oil, and any oil correction will now happen in early 2018.

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