Not looking good for markets. S+P 500 update.

The roll over of the markets continues since the recent possible topping point called out here.  This rolling over is difficult to reverse suddenly.  It shows growing agreement by the market which is quite different than a sharp peak reversal which shows that short term opportunism is still in play.  The roll over is how the players try to sneak out the back door quietly without causing too much panic by other market participants but it is sending up a red flag for me.

What I will be looking for is a strong confirmation of new selling to begin very early next week.  It could even take the form of a big gap down on Monday.  Soon we will be getting that 500+  point DJIA sell off in a single day and it should coincide with a big pullback in the credit indicators I have been showing of late which appear to be in 5th of 5th of 5th.  We should also see another indicator of credit stress unveil itself which will be the junk bond interest rates beginning to surge. 

You can monitor this with the JNK ETF which, as bond rates go up will fall in sympathy.  JNK is a good short opportunity for anyone who wants to stay in markets but without any leverage.  I would tell my mom to go big on a JNK short if she had to be in the markets.  The biggest risk with these ETFs is that they themselves default on the gamblers.  In other words, do not put it past any of the short ETF fund managers to have taken the assets of the ETF gambling long.  While this would be illegal, the temptation to believe that the fed is in control is very high and thus it could be easy money to go long with little perceived risk given that they think they will never get caught.

Of course, that is exactly when the tide goes out and we see who is skinny dipping...

In any case, I am holding TVIX over the weekend again and in fact have not sold it since I last bought at $2.67.  That ending diagonal 3rd wave strongly suggested that a peak was near (blue path in the model at the link) and so I began to fear not being in at the breakout more than I feared a TVIX breakdown.  I reviewed my stop level each day to see what made sense based on recent chart action.  I noted that TVIX was holding its own even on days where the 3 indices were green.  This suggested that the volatility index was near a major bottom.  Time will tell on that but we really are going to know more come Monday.  I was hoping for a stronger indication sooner but this sideways to down action turned into a roll over which I think now will begin to accelerate to the downside.