The markets will make up a reason to hate what Yellen just told them.

People think that the market reacts to news.  This is not really true as Prechter has show scientifically many, many times.   It may appear to react but the proof is in the way it reacts.   Yellen was out today saying she will keep interest rates low past the point where the fake unemployment rate goes below the arbitrary target of 6.5%.  That, as you might recall, used to be the trigger for the Fed's exit plan.  But even though the goal posts seem to be moving in favor of stretching the Ponzi out again, the markets took her decision as a negative thing that sparked an afternoon sell off.  I think the markets are set up to continue that sell off tomorrow in a big way.

Below is my current model for TVIX.  I think the big spike into early Feb was a first wave up.  It was an ending diagonal and ending diagonals can retrace their entire length as this one did.  But it could not be a first wave up if the charts went one penny below the start of the first wave, and to date TVIX has been careful to stay above that point.  In mid Feb, TVIX found a bottom which I labeled wave 2.  Since then we have been working on 1 of 3 consisting of 1-2-3-4-5.  After red 5 was hit, we got a big a-b-c pullback into wave 2 of 3.   Again, for that to have been a valid 2nd wave it had to stay above the starting point of 1 of 3, which it did.

I think we are now working on wave 3 up.   With all the repression that has been occurring of the short side, I expect to see this explode violently upward.  If my model is right, this will form a higher high than wave black 1.   You will get confirmation that "it's on" by the break out of the down-sloping red line some place within the blue circle.  I expect that this will happen sometime within the 3rd wave which jibes with my views that TVIX is right now at the early stages of a 3rd wave.  The last wave, wave 1, was good for 100%.  I do not think it unreasonable to expect 80-100% on this next wave as well.  Keep in mind, the early waves always do better from a percentage gain perspective even if the later moves result in larger absolute number moves.  This is why the market purposely makes it difficult to pick exact bottoms - if it were easy then too many people would be mega millionaires.

Of course I will be watching the count to see if it looks like it will form some kind of diagonal, etc. which it always can do.  I'm still on record as believing that the real crash starts in May.  Why?  Because of the old connection between the January Effect and the trader's saying of Walk Away in May.  It has been a while since we heard it on CNBC and so it's time to dredge it up and remind everyone about it as the markets head down for a significant collapse.