It is possible that what I have labeled as 5 below is only A of 5. If this is the case, the twin peaks will break out on Monday and then form a 5 wave throwover that comes crashing back into the channel to seal the deal. That slight 5th wave throwover that is circled below could be telling us to expect one more wave up (C of 5). But my primary model right now is that the entire throwover and is trying to be tricky this time by being low key. Either way we will know on Monday. I think we gap down at the open and then just keep extending the pain. I think the lower rail gets taken out by the gap.
Time will tell but if you see this, run into TVIX (currently at $5.54) or FAZ (currently at $20.07) or SPXS (currently at $29.95), all of which remain holds unless a higher high is seen on the DJIA (higher than 16622). You can also buy puts on your favorite Ponzi Pump stock. I would not go with puts just yet since they are too difficult to exit the position without a significant loss. That's why I like the inverse ETFs. On the other hand, if you must buy puts, buy them with some time on them. That way you take advantage of the low VIX premium yet you won't run out of time value if the markets don't break down immediately. Either that, or dollar cost average into them over time.
2 comments:
Why did you model a 5th wave with only 3 beats? Shouldn't c of 5 be 3 of 5 instead? Waves 2 and 4 alternation would suggest that c of 4 of 5 is developing. Or am I missing a corner-case EW rule? Am I being too fearful and not very disciplined when my guy feeling is that there seems to be more desire in the herd to pretend and extend?
There are 3 steps to wave 4, A-B-C. As you said, this should be 5-3-5. Nowhere did I model C as having only 3 steps. The chart I provided does not have enough resolution in order to see the 5 waves of C but they are quite evident on the 1 minute chart:
- wave 1 goes from 16555 to 16570
- 2 pulls back to 16563
- 3 rockets up to 16582
- 4 pulled back to 16580
- 5 peaked at 16587
Of course my count can be wrong. Modeling at this tiny degree is difficult and modeling 5th waves has always been a challenge for me. This could also turn out to be an ending diagonal with one last thrust up to throw over to ~16598 on Monday before turning down. But any morning pop should be followed by a reversal and then a very red close if this model is correct.
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