Facebook update + broader short term market implications.

It's no secret that I think FB will collapse big time.  It is a useless fad of a company and more people come to that recognition each day.  Zuckerburg is spending all the company Ponzi cash on stupid acquisitions that will not pay off soon.  But I suspect that he is seeing massive numbers of account closures and realizes that the growth phase is over.  Here is my last post on FB where my model suggested that the bottom of the channel would provide support.

In fact after the briefest of spikes below the channel (which spell doom in the future IMO), the bottom of the channel is now forming support.  That's because 5 waves down to the bottom of the channel must be followed by 3 waves up.  Per the following inset, I expect it to bounce somewhere between $65.21 (the 50% fib) and $66.94 (the 61.8% fib).  Of course, it could always wimp out to the 38.2% fib at 63.47 and if that is all it gets then it should be taken as a sign of great weakness (as if the big pullback of the last 2 weeks could actually be characterized as anything else).

FB is not going to rally in a vacuum so be careful with all shorts right now.  Give the dying fish a chance to tire on the line.  Don't just try to haul a green fish into the boat, he will snap your line or spit the hook. 

After the recent breakdown on TVIX I need to re-model the broader markets.  Below is my current model for $COMPX.  This index has now formed a clear channel.  Looking at the past waves I think it is a series of 5-3-5s which count as a-b-c respectively.  If this is the case then we should expect a strong rally all the way through April right into the waiting hands of the Walk Away in May crocodiles.  Ever since I saw the January Effect return a negative result this year I have been thinking that it would be a Walk Away in May year.  I suspect what could happen is that a significant crap out goes from May through June.  That would be wave 1 down.  Then a big summer feel good rally into wave 2 which could be a vee and thus is worth swinging long for.  And then the winter knocks on the door starting in Sept/Oct and that is when the monster 3rd wave down happens that nobody will supposedly have seen coming.

All that long term thinking is great because it helps one not be surprised if it plays out.  But shorter term things are happening and must be managed properly so that plenty of cash remains to go long TVIX when the carnage begins later this year.  The lower TVIX goes without me in it, the happier I am!  It just means that the percentage gains will be higher when it does finally reverse and begin to show a real and lasting fear in the investment world.  A long overdue fear IMO.  There is currently a great depression in fear!  Ridiculous amounts of leverage has been taken on and very little insurance is backing it up. 

The above $COMPX model is considered best case for longs.  There is another possibility which is that the recent wave down was an ending diagonal which was wave 1 down.  This is not my top pick right now but if  the current wave up could not make a new high then it would result in a declining double top.  Today I think 5 waves played out or nearly so and it resulted in a move to the level of the prior 4th wave.  Out of respect for the remote possibility that too many people are waiting for a May collapse and that the market can always decided to go south early, I waited until most of the pain hand been inflicted upon TVIX and then got in near the close.  We should see a small AM pull back in the markets at the very minimum, perhaps back to 4237 (a loss of 30 $COMPX points).  That would bring us to the prior 4th wave.  Then I will determine if that looks like support or not.  If so, I'll liquidate TVIX without an eye blink.  I don't think wave pink 5 can extend because wave pink 1 is already longer than wave pink 3.  All of these factors were considered before I clicked the buy button.  I might have to endure a trip to 4280 (the 61.8 fib) before I get my a-b-c pullback but that's a risk I decided to take.

Per the two pink directional lines, we are at a decision point IMO.  $COMPX will either reverse downward with strength after that blue C wave is done OR it will do an a-b-c pullback to pink 4 as described above and then rocket upwards into a big C wave for most of the remainder of the month.