TVIX update.

With Dow futures down strongly this AM, I got back into TVIX pre-market losing only few cents of gain.

Today's TVIX breakout was most promising for shorts.  After forming 5 clear waves down on the log scale chart below whereby the 5th wave threw under slightly, the chart has now broken back up into the channel and then, of course during wave 3, broken out the top channel line as well.  Wave 4 of 1 was the first back test of that line and I expect another back test during C of 2.  The longs will think this is a head and shoulders forming on the negative stocks as that right shoulder forms but the neckline breakdown will likely not materialize. 

Instead, it will most likely break upwards with some drama into a 3rd wave as shown below.  After that we will have to see the wave formations to determine if 5 down was just the end of a 3rd wave or not.  I don't think so but given all of the ending diagonals which have been 3rds, we cannot ignore it as a possibility.  Again, a high degree of skittishness at the turns is how you really rack up the long term percentage gains.

Here is the close up action on the 5 minute log scale chart.  Wave blue 1 up was an ending diagonal that did not produce a vee pullback and that is an important sentiment indicator IMO.  It tells me that the herd is nervous and that the herd is starting to edge back into crash insurance in order to hedge its (ridiculously) leveraged long positions.  We TVIX wave surfers are effectively trading in the crash insurance market.  Most people never think of it like that but the perspective is important because having the right world view helps one maintain his conviction when large sums of money are at stake.

Tomorrow's trading action is important in that it will tell me if the wave count below is correct or not.  That small triangle that is sitting on top of the new support line suggests to me that the coming wave will be the last of the impulse.  I will be trading back out if that happens because a 30 cent retracement is expected afterwards in the form of an a-b-c pullback.  If that C wave holds at or near the support and cannot break it down then I will be back in for a nice ride back up in to 3.

Time will tell but I am increasingly confident that the rally since 2009 is very, very near the end if not already peaked and now falling behind in the rear view.  Instead of the futures being green endlessly as they used to, they are now commonly red.  This is a big change that I have not seen in a long time and it should not be ignored by those who are market long or short.