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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