Important TVIX update: The Big Picture

In this post I showed a detailed model to support my view that the fed-driven bull market that has been in place since 2009 is in fact now over.  This is a big claim to be sure.  In order to check its veracity, I have now charted the count of TVIX from the last major rally.  In other words, the last 4th or C wave up for this index.  This can be a bit tricky since the value of the index bleeds away at a constant rate based on the passage of time.  However, the log scale is perfectly suited to removing the time loss component to reveal the underlying wave structure.

Here is the wave count.  The count flows easy and naturally without any big leaps of faith.  Wave 1 is the same vertical length on the scale as wave 5 (that's what the grey rectanles and parallel grey lines tell us).  Wave black 2 is complex while wave black 4 is a vee thus showing alternation.  Black 1-3 and 2-4 are nearly parallel.

So, the top level count looks very, very good to me.  Now of course, the devil is in the details because small dollar moves represent big percentage moves at this point. Zooming in to just black 5 we get the chart below.  Again, it counts perfectly with no stretches of imagination.  Additionally, there is a nice 4th wave triangle in exactly the right place (black 4) and to make things better, it required the time stretch associated with that 5 wave triangle in order to make black 1-3 almost perfectly parallel to black 2-4.  Also whereas black 2 was a vee style retracement, black 4 was sideways and complex.  This is perfect alternation.

Let's say the 2009 rally was in effect still (Note: I maintain that it is no longer in effect, it is over already).  With just the completed 5 down wave pattern you see here on the screen, one could rightfully expect, at the least, an a-b-c retracement to the prior 4th which is just shy of $8.  Just that right there is 287% - nearly a triple from here (to be clear, this means "triple the value of your account", not "triple your profits".  Profits would be 187% of your bet).

But this is not just the end of 5 waves down.  It is at the very least the end of 3 sets of 5 waves down, an impulsive sequence that began back in Sept 2011.  The prior 4 (i.e. the top of the grey rectangle bottom right of the picture above) is 39.  That's a 12 bagger from here.  That is definitely going to happen, no doubt.  But if this is the grand supercyle top that EWI (and I) believe it to be then this is not just the end of 3 sets of 5 but rather of [3 sets of (3 sets of 5)].  Retracing all of that is going to be far more than a 12 bagger.  This is why I say 20x should be a minimum target but that I will be disappointed if this doesn't eventually yield 40x.

The big question for me is not how high the profits will be but rather will the ETF fund go bankrupt along with the rest of the leveraged market gamblers before I can exit with my profits.  Anyone who doesn't think the end game can still involve them getting screw out of their winnings by the insolvent markets is an idiot.  If you begin to see major finance house begin to default without the government bailing them out (which is not going to happen this time around because of the new political environment and the magnitude of the bail out that would be needed) consider at the very least taking half of your profits out of the system and into your hot little hands (NOT a bank) even if the wave count doesn't say the TVIX run is peaked.  Make sure you end up with something for your work here because the wealth to pay off all of the IOUs in the system simply does not exist except in paper accounts.  As of now cash is re-ascending the throne to become king again.  Those with cash in hand when things hit rock bottom in 3 years will be able to buy valuable, income producing assets on the cheap.  Unless of course, the crash from the grand supercyle top involves WW3 which it in fact just might.