TVIX alternate count.

One of the hardest things to do is to nail that final 5th of 5th of 5th wave in the model.  I have stated many times in this blog that I always find making this determination challenging.  It's not different this time.

Because of the challenge, I always need to have some kind of alternate model (whether or not I share it in my blog).  Fortunately, at this point it should only make the difference of a few days and a few cents either way.  This is because we are already dealing with a pretty low level wave count (i.e. fairly high resolution).  So no matter what I think the turn has to come within a week if my primary count turns out to be wrong.  In other words, if it is wrong it will not be far wrong IMO.  Of course, if my primary model turns out to be correct, the bull market is already over and TVIX will not see a lower low.

So in any case, below is my alternate count.  It is bolstered on the observation that ending diagonals have been 3rds for quite some time now.  Also in favor of this model is that two of the internal waves of that diagonal could be counted as if they were 5 wave moves or 3 wave moves.  A real ending diagonal triangle is made up of a-b-c structures with no 1-2-2-4-5 impulses. The market was being ambiguous by not making big transitions between waves.  So if the diagonal was the 3rd wave and then the subsequent 3 wave upward movement last week was a-b-c into 4 then we can have one more wave down from there before the count is finished.

In theory, this final wave could just extend and extend to really screw the shorts in one final thrust.  However, I don't think so given the nature of the chart so far.  But if we got a big capitulation move down to the $2 range then it would not be a sell signal.  It would be the "double down quickly" signal.  I say bring it on if that's what they want to do.  All that will do is let way too many people get in cheaply.  Still it could happen if that's what the herd decides to do.  Lemmings have been known to run off the cliffs you know.

In this alternate model we will be working on the 5th of 5 next week.  The grey boxes show that 1 of 5 was longer than 3 of 5.  That is useful information since 3 cannot be the shortest.  That means that 5 has to be shorter or equal in length to 3.  The length of 3 is represented by the blue rectangle far right.  If this model is correct, part of 5 has already transpired last week. It would suggest a gap down Monday AM and then a move down to probably either the top rail (more likely) of the ending diagonal or down to the bottom of it (less likely).  A fitting finish would be morning weakness involving 5 small waves down that do not result in a new low (i.e. inclining double bottom due to failed 5th) and then an afternoon reversal on increasing volume.  It's also possible to see it slowly move down into Wed to give the owl ears the right width before reversing back up again.

If the market dips at the open, my primary model has likely won.  If the market is up weakly at the open then I will begin to think that the alternate model will play out.  In any case, people will tend to blame the visible turn, when it arrives, on some particular news: bad earnings by this company or some geopolitical turmoil someplace in the world.  But none of these things are the underlying cause.  This has been building to the point for a looong time. 

It's like the idiots who think that the killing of archduke Ferdinand was the real cause of WW1.  What a load of crap.  Tons of things were playing out long before that happened that were leading toward a face off and if I could go back in time and save the Duke from being killed it would in no way have averted WW1.  Similarly, the news spewed by the useless talking heads on financial TV means nothing.  The turn is coming no matter if there is apparent good news or bad because the waves from the past tell us that a collapse is built into the future in exactly the same way that scientists predict the sun spot cycle: they use repeating wave patterns that have tons of history behind them in order to predict the future.