DJIA/TVIX update summary

Here are my thoughts on DJIA and TVIX today.  I'm not sure if wave 1 down is complete or not but it's close and the potential for a rapid reversal to occur is there so for now I decided to stay out of TVIX and just watch. 

Unlike the past 8-10 days or so, the past 4 days have slowed momentum, gotten choppy.   It could mean the herd is ready for a turn.  The red path below is my primary, mainly because of the double bottom circled in red.  If that breaks down then don't ignore the potential for this to turn into an ending diagonal as shown in blue.  The blue route would likely mean a stronger rebound than the red IMO as many would associated it with a change in trend.

It should be kept in mind that, while the EW model being used did call the top level turn pretty well, 2 weeks of selling does not a new bear market make.  The bear market is strongly suggested but is not confirmed yet!  "Buy TVIX and hold" is simply not a sound strategy a this juncture.  The above model, while not my primary or even my alternate right now, shows how others could be viewing this action and it could cause them to go "all in", thus rapidly driving up the price.  This is, in fact, how I think 3rd waves have gaps.  The big leveraged players go pedal to the metal on the 2nd wave bounce hoping for a higher high. But then they find out they are the only buyers and have to panic sell.  This is why I really don't want to just hold through the 2nd wave even if it means giving up part of the profits for the 5th of 1.

Also note that the longer this takes to bottom (i.e. roll up), the stronger this bottom becomes.  So if this keeps going sideways and up for a few more days then we should be considering what else might be happening other than the current model.  I can't tell you how many times a little warning signal has saved me from big mistakes in the past.  Big mistakes are easy when swinging big leverage.


I tried to short TVIX on the opening pop but TDameritrade would not allow me to flip short the same number of shares short that I usually am long.  So I knocked several thousands shares off the order, same result.  Did that again, same result.  So I guess the margin requirements on TVIX are very high which is too bad because they don't make a double inverse VIX that I know of.  That's going to impact my swing trade plans.  So I just had to watch the shares go from $4.10 down to $3.65 without being able to capitalize on that move.  What a shame.  But for reasons shown on the chart below I think we are in no man's land so I vote for caution while more data is gathered.  TVIX broke out of the horizontal line from the last size-able peak, could not hold it for any time at all and then ducked back below that line only to test it from below at the close today.  Of course it could break out again tomorrow and if it did I would likely buy the breakout and then use that line for a pivot between buy and sell.

Should tomorrow begin a DJIA rally/TVIX sell off, the green and red models would be textbook cup with handle pullbacks.  This is a nice rounded cup which technical analysts look for in a C+H.  It is about the right time frame.  Any more than a 50% retracement and the C+H goes out the window.  It really should be more like the olive than the red.  The blue model could happen if the ending diagonal was really just the 3rd wave down.  In that case blue could do as shown or it could even go down to the $2.00-$2.20 range for the "real" bottom.

Once we get past this 2nd wave pullback (if that is indeed what it really is), then we will get to see if we get 3rd wave type action. If so, the comfort level that a new bear market is unfolding will rise dramatically and I can just swing trade the big turns instead of being skittish every other day.