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Crude Oil Price Drives Lower with S&P 500, VIX Snaps Back

CRUDE OIL PRICE PLUNGES, S&P 500 INDEX SINKS, VIX ‘FEAR-GAUGE’ SPIKES AS CORONAVIRUS PANIC LINGERS

  • Crude oil crashes back toward month-to-date lows after plunging another 8% on Friday
  • The S&P 500 Index comes under pressure despite a monumental fiscal stimulus package
  • The VIX Index hangs around extreme highs with volatility elevated amid the coronavirus pandemic and intensified recession risk

Markets look like a sea of red so far during Friday’s trading session. Risk assets like crude oil and the S&P 500 Index appear to be resuming their broader downtrends after experiencing a short-lived relief bounce earlier in the week. The ‘bear market bounce’ in oil and stocks likely came on the back of a recovery in investor sentiment driven by massive amounts of liquidity from the FOMC and an unparalleled $2 trillion fiscal stimulus bill to offset economic pain inflicted by coronavirus pandemic.

US 500 MIXED

Data provided by

of clients are net long. of clients are net short.

Change inLongsShortsOI
Daily8%3%4%
Weekly-28%116%31%

CRUDE OIL PRICE CHART WITH S&P 500 INDEX OVERLAID: 4-HOUR TIME FRAME (FEBRUARY 18 TO MARCH 27, 2020)

Crude Oil Price Drives Lower with S&P 500, VIX Snaps Back

Chart created by @RichDvorakFX with TradingView

As dismal economic data starts to trickle in, however, such as the historical plunge in Markit PMI, the sharpest drop in consumer sentiment since October 2008 or the record-smashing spike in jobless claims, markets may remain in risk-aversion mode considering a recession likely looms.

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VIX INDEX PRICE CHART WITH OIL VOLATILITY & HIGH YIELD CORPORATE BOND VOLATILITY: DAILY TIME FRAME (NOVEMBER 2019 TO MARCH 2020)

Crude Oil Price Drives Lower with S&P 500, VIX Snaps Back

Chart created by @RichDvorakFX with TradingView

Meanwhile, measures of volatility like the VIX ‘fear-gauge’ and oil volatility (OVX) or high yield corporate bond volatility (VXHYG) are starting to climb back higher toward extreme readings not witnessed since market panic during the global financial crisis. With the VIX Index and other volatility benchmarks on the rise, there could be more pain ahead for the S&P 500 and oil while safe-haven assets come back into demand.

— Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight