In the last year or so we have seen oil crash and in the last day or so another crude oil price drop has made its presence known. There are no daily trading limits in commodities and it is the main reason why oil has made such huge price dips.
The decline is not finished just yet as I expect more downside to come. The Gold/Oil ratio is flashing and today the Gold/Oil ratio is the second cheapest ratio in two years.
The Gold/Oil ratio sits at 29.42 today matched only once in the last two years! This is a fast ratio move and I would like to see this ratio continue to spread in the short term. I trade the Forex oil units and have made some small good short bets, but the Gold/Oil ratio is sending a signal that we may have to reverse all our bearish thoughts as we will end up in a crude oil bear trap sooner or later.
Gold soaring, oil crashing changes the Gold/Oil ratio quickly so if we ignore it we can find ourselves in a crude oil bear trap and won’t have a clue that it is happening.
Oil might have another small degree, 3-4-5 wave count, to play out, but after that, a bullish oil move could surprise us.