TVIX update

TVIX bounced today as expected.  Here is the important last month or so of the chart.  A variety of things could happen at this point. 

First, we could see this start to go sideways tomorrow indicating that a 4th wave was forming.  After that, a quick test of the upper rail that fails followed by a pull back to $2.72 where it finds support, forms wave 2 and then breaks out above the top rail in a 3rd wave.

Another possibility is that they take this down to the mid $2.60s again in order to form an inclining double bottom (inverted owl).

Tomorrow's opening is critical toward understanding whether or not the bottom is in for TVIX.  It can really go either way as shown below.  Keep in mind that I am expecting an AM rally for the $COMPX based on today's closing chart.  If this happens then by all rights we should see a pull back in TVIX.  

Now here is a seemingly tiny but very important possible twist: TVIX has set itself up for either a pull back or a 3rd wave spike tomorrow.  If TVIX rises into a rising $COMPX, that is bearish divergence big time for the markets.  It means that even though stocks appear to be bouncing, the smart money is running to buy crash insurance anyhow.  This has not happened at all for TVIX that I know of.  If the market is up, TVIX has always been down.  In fact, even when the market goes down TVIX has, on rare occasion, gone down.  So if we see the AM pop in $COMPX along with either a pop or just sideways movement in TVIX that will be an important sign that investor sentiment is changing about the need or lack thereof for crash insurance.

TVIX could also put in an inclining double bottom as shown below in order to form the owl.  Since the shares were up in the after market I decided to get to the sidelines @ $2.81 with a nice little gain just in case they do that. I would rather lose a few cents of upside than give back all my recent gains in a "vee" style wave 2. 

Besides, this whole ending diagonal thing is not confirmed yet.  In other words, while I do believe that markets have topped and that TVIX has bottomed, the smart bet is to spend the $10 to get to the sidelines and then see what happens tomorrow because I risk 15 cents of downside in the owl scenario vs of 5-8 cents missed upside in the bearish divergence scenario. 

If we get an AM pop to $2.83 or better then we have our answer: purple 3 is unfolding.  In fact, it could gap up to $2.88 and thus break out of the ending diagonal.  That would be a sure buy signal for me especially if the $COMPX is correcting as it happens.