Wave 1 of new bear market seems nearly done.

I just exited the VXX position that I re-took yesterday on the way home from China.  At 5% gain I might have left some money on the table but I don't have time to watch it all day.  I also dumped my FAZ just now.  The FAS (opposite FAZ) chart is telling me that we likely have a failed 5th situation on wave 1 down and so a strong rebound is expected to at least the 38.2 but just as likely to the 50% fib.   7% is a trade-able amount so I might just flip long on FAS at the end of today.  But after that it will be back to FAZ because when the 3rd wave down hits the markets it is going to be a punch in the stomach.  The market will thus figure out that "buy the dip regardless" is no longer a working play and the market is a fast learner.

These short term day trades have been good to me on these leveraged issues but after the market clearly communicates its new downward direction I will be less likely to trade in an out so often.  I'll just sit through the small wave sucker rallies once the market tells me the bear is back.  Right now I think that it is, I model that it is, but I cannot be sure until we get confirmation and that has not yet occurred.  The market has bounced back from worse. 

The chart is telling me that this is also what the herd is thinking, hoping: "the damage so far is not serious, it might recover".  I seriously doubt that my model will fail me on this but hey, it's just a model.  But if we get the indicated bounce shown below and then a big gap down into a hurtful 3rd wave then that is the first major confirmation.  And if that 3rd wave then turns into a triangle 4th wave instead of starting yet another bull run and then that 4th wave breaks down into a 5th then that is real confirmation of a direction change.

Below we are looking at 1 of 1 down.  My guess right now is that 5 of 1 and then a-b-c of 2 will both be done by mid April.  Then we will be starting the big 3 down in the face.  Many hundreds of Dow points evaporating on a good number of days.  Big gaps down with plenty of fear that comes in wave after wave as people figure out that the Bernanke put is ka-put.