Important technical decision point: a tale of two outcomes.

The markets are rapidly approaching an important decision point: break out to new highs or break down in a big way.  While the sell off of late has been more severe than normal over the past 2 year bull market, it could still be nothing but a blip in the road to Perpetual Ponzi Pumped Prosperity.  At least, that's what the market hopes for.  Yellen could, they think, and with a simple wave of her fountain pen, reverse the sell off and make things all better in the land of make believe asset price valuations.

On the other hand, people like me believe that the chart action leading to this point indicates that the herd is ready for a turn south and that it is only looking for a reason to get in the car and drive.  So many mixed metaphors.  So little time.  In truth, in my mind's eye I am really seeing things. I can see the herd piling up on the banks of the potentially crocodile-filled river wondering if it's safe to cross.  The long the herd waits, the more wildebeests pile in behind making the real possibility of a direction change less and less possible with each passing second.  Under these circumstances, one of the animals is going to make the plunge and soon it will be followed by a couple more until, like a dam bursting, there will be a flurry of flesh heading into the river - the river that is the gate way to the long journey south that lies ahead.

The difference in view points expressed above is extreme: 180 degrees divergent.  Here is what the chart analysis from both sides looks like.  Not that in either case an trade-able rally is expected soon.  Note that in either case, it will look like both models are correct for a time.  But at some point the left or the right model will assert its dominance and that time period is not far off.  Days not weeks.

I believe that the right hand model is the correct right model.  I believe that equity winter is setting in with indicators like Obama's forced investment in government debt "MyRA" and Google's share split that sneakily removes voting rights.  These moves are being made for a reason: the con men running the show believe that share prices are about to head south and thus are trying to prosper from the herd on the way down as they did on the way up.

If the right hand model plays out as I expect it will, the red line represents a 3rd of 3rd and that means it will contain a 3rd of a 3rd of a 3rd.  That means gaps down; cliff diving is expected.  Close to the the money put options with a 2 month expiry sky rocket under these conditions.  $300 turns into $3000 in a matter of a few days.  For the less adventurous, TVIX will be up $30-50% in that time frame, perhaps more.

For now, I urge caution to the bears.  Let the chart play out.  Let the bulls have their little reprieve before the beating begins in a way that many cannot imagine.  Watch for a turn at 2 of 3 (2/3) in the red portion of the right hand chart.  Remember, despite the fact that the COMPX model I posted yesterday called today's move down almost exactly, these are still just models.  Set trigger points for yourself to get stopped out.  I sold my TVIX today for a 10% gain.  I'll be back into it again for the big wave down and I also plan to buy some FB puts.  They are pricing in almost no risk.  That is just foolish and it provides me an asymmetrical betting opportunity.  I bet $200 that FB will break down its ending diagonal as 3 of 3 collapses.  If I'm wrong, I lose $200.  If I'm right, I make $2000.  I like those odds with the full knowledge and understanding that there are no certainties.