The model given in my previous post on potential market topping opportunity remains valid. I wrote about the DJIA, "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."
The scenario mentioned there seems like it could be in play. Note that the $COMPX is up far more in percentage terms than the DJIA. I model the current wave as either 3 of C of 5 or 5 of C of 5. That final wave is always difficult to count. But the trigger for a sell off remains the same in either case: a break below the 1-3 line.
TVIX got creamed today on a relative basis. By that I mean that a measly 110 point gain in the DJIA caused TVIX to fall by 6%. The likely reason for this is that by the DJIA creating a new high, a Dow Theory breakout was confirmed.
Bottom line: you can take a speculative short position near the close of trading today but be prepared to get stopped out if a pullback tomorrow cannot break back down into the channel of the above chart. The confirmation for safe shorting is that break down back into the channel.
Monday, May 12, 2014
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