Wave 2 update using SVXY as a proxy

SVXY continues to bounce into a typical wave 2 vee style bounce.  It is now kissing up against the 50% fib.  This should be some level of resistance so I removed the stop loss from my TVIX of 3.09 and rode the capitulation bottom out in the last few minutes of trading where it fell to $3.01 without hardly any movement from the broader indices and then closed at $3.05.  By my count, at the very least we should see an a-b-c to $3.15 tomorrow before being hit with another wave down.   So if it goes back up to $3.15 in the AM and then reverses below $3.10 I will sell and let it bleed out.  For now, I put in stops at $3 in case they move it down quickly in the AM tomorrow.

I don't know for sure if wave 2 is done or not today.  I know that C is never the shortest and that it would be the shortest if the blue count for C below.  But you never know what the count REALLY was until it's in the rear view and fading past you in time.  So I am prepared for tomorrow to be the start of wave 3 down in the markets but my primary count is actually the red model below which implies a bounce of SVXY to the 61.8% fib and possibly an overshoot in order to fill that gap marked with the pink rectangle.  By any measure, wave 2 should be about 75% done now.

One reason why I even have an alternate count (instead of just insisting that SVXY will go to the 61.8 for sure) is the $COMPX.  It tacked on 44.8 points today and is sitting at 4433.  If it put on just 53 points tomorrow then it would bust out to a higher high and kill the top level count.  That is always possible but it is the goal of the 2nd wave of a new bear market to make everyone believe that a new high is just around the corner.  It is the goal of the market to engender hope.  $COMPX paused at the gap.I suspect it will pull back to the 61.8 and then come powering back up and fill that gap.

 
I did like the little capitulation bottom in TVIX down to the nice round number of around $3.00 followed by a rapid move back up.  But the bounce was only partial so we really have to see how it goes tomorrow AM.  Right now I think TVIX will bounce to $3.15 and then turn back down.  Per this model from 8-5-2014, my next bottoming target for TVIX is for it to retrace the full ending diagonal of wave 1 but to not go to a lower low.  If the red model shown below plays out then expect it to end suddenly and reverse with a vee.  Why??  Because it will be an inclining double bottom and the left bottoming was rounded and so the right one will likely not be.  It likely will dip down into a vee bottom, shake out all the weak hands and then come zipping back up to leave as many people wondering what just hit them as possible.

My alternate model, which I have already given several times in prior weeks, is that the recent spike was just wave 4 (i.e. the blue model above).  If this turns out to be the case then a new low will be put in somewhere between $2.20 and $2.40.  If that low is put in with 5 waves down then the odds of this being at a real long term bottom go about by about 10X.

I am not counting on this lower low to happen but to think it cannot possibly happen is to underestimate the bull.  I made a fat profit off that last wave up, easily covering the losses I have taken on the way down from getting stopped out (which has been multiple times since I have been watching/testing/trying to find a TVIX entry point since $7).  This was possible only by not underestimating the bull!!  In fact, net profit is now 30% over all of these trades.  That might not sound like much but this was achieved in a bear market for TVIX.  I now have 30% more cash to employ when TVIX flips into a confirmed bull market.  It's hard to hope for anything better than that.