GLD update

As documented in these pages, I'm currently expecting a pull back in TVIX and so I wanted to take a chance on gold.  I want to show the models I am considering here.  Most EW counts I see on the web mimic that of EWI which believe that a 4th wave has either just finished or needs one more wave up to finish.  Nobody out there has a perfect track record but EWI has called many important turns successfully because they look at all the sentiment numbers and other underlying facts which support this count or that.  If everyone is bullish gold and if margined gold is high and if the wave count looks like it just finished a 5th wave up, chances are that it was indeed the 5th wave.  In this case, people are not sure if wave 4 is done and I am betting for now that it is not.

In any case I'm risking getting stopped out for a small loss on Monday for the opportunity to make some good coin on JNUG.  EWIs primary count is the black and blue numbers.  Observe how big each of the mid wave reversals are for each of the a-b-c and d waves.  C was rather tiny relative to the others but that's because it was a 3rd wave and they tend to get where they are headed without too much fooling around.  But the other mid wave action took time to play out.  If the "e" wave is now complete then we are supposed to take it as fact that that little red circle was the mid wave reversal.  I find this questionable enough to bet against it for the time being.

Also, it looks like an ending diagonal-like falling wedge just finished in a 3 wave move as modeled below.  So the question now is whether this just recovers to the prior 4th as shown or whether this move is really the B wave of the larger E wave shown above.  If we only get 3 waves up as shown below before reversing and breaking back down through the diagonal then I think the E wave is in and lower lows can only be expected as the next move down in gold brings it to about $1000-$1100.

However, if I see 5 waves up from here then there is a good chance that C of 4 is playing out and the C wave is generally strong like a 3rd wave.
 
There are few bets on the market which move as quickly as JNUG/JDST.  If you can get in front of their moves you can make a fortune in very short order.  However, TVIX will also make dramatic moves in terms of percentage change, especially right now given the very low price.  So it really comes down to what play do you think has higher odds of panning out per the model.  TVIX has to get the nod for now simply because there are so many views of the data.  We have the DJIA, $COMPX, S+P500 and the Russell 2000 each representing significant sectors of the market.  We have credit indicators like JNK that have just broken down.  We have advance/decline and volume data for all of the above that helps the case.

So my primary play will continue to be TVIX for some time now but I will swap over to the metals and miners if I see short term opportunity.  I certainly want to be in TVIX during the 3rd of 3rd down.  But know this: I really would rather go long something (if intelligently possible) than be short the markets.  Why?  Because government hates shorts (even though it should be market neutral) and it sometimes takes drastic if not illegal actions to punish them. When I was short banks with heavy puts during the 2007-2009 crash, government just changed the rules and disallowed shorting of banks for a time period.  It didn't change matters in the long run (banks shares still crashed) but it screwed some time value out of my puts that I should have been able to collect on.

The reason I am saying this is that at some point the miners, who have gotten beaten up for years, will find a capitulation bottom.  Perhaps some players like DRD already are there.  If we can verify that a 4th wave and then a 5th wave down have occurred since the start of the metals bear in Q3 2011 then the very least we should expect is a 38.2% fib retracement.  If the 5th wave goes down to $1000 gold like many believe, miners, especially the juniors, will have been beaten down so very hard by then that the 38.2% fib pop will skyrocket some of their shares beyond belief in percentage terms and JNUG will be a huge play during that time.

Of course, everyone COULD be wrong and the 3 waves down so far from the 2011 highs could just be an a-b-c retracement.  That would be all the recent action is really a bottoming and the beginning of a new metals bull.  This is not my primary view but nothing can be discounted.  Charts like DRD actually support the notion. 

Man would that blow a lot of minds.  It has always been my thesis that in the end game both the dollar and gold would go up at the same time and then, even further on in time, the dollar would collapse (first deflation and then massive inflation).  It's a lot to fathom so it's best for me to be aware of the future stuff but focused on the here and now.