TVIX update

So it looks like TVIX took the blue path modeled by my last TVIX update even though it was not my primary model.  This leave two choices:

1. The recent a-b-c from Aug 25 to Sept 15 was just 2 of 5 and then the wave from the 16s of Sept until today was 3 of 5 (probably not 1 of 3 of 5 since wave 1 which ended mid August was the extended wave).
2. The recent wave from Aug 19 to Sept 15 was 4 of 5 and then the wave from the 16s of Sept until today was 5 of 5. 

 It could go either way and so we just have to watch the wave count and use stops.  Scenario 1 above should be self explanatory so I want to focus on looking for scenario 2.  That count is shown below.  What it basically says is that the count for wave 5 is 1-2-1-2-3-4-5-3-4-5.  In other words, extended 3rd wave.  That would make the low of Aug 18th not the bottom of black 5 but rather the bottom of 3 of 5.  Then we got a sideways movement with the expanding wedge typical 4th wave move into 4 of 5 and now a slightly lower low for 5 of 5 than from 3 of 5.

This is a long way of saying that the DJIA rally wanted to continue into Friday in order to bask in quad witching, the Scotland independence vote and the Alibaba IPO.   If TVIX gaps down tomorrow the it is probably working on 3 of 5 (the past few days having been an extended 1 of 5.  If this happens, the $2.20-$2.30 range is looking good for TVIX.

One bit of evidence for this model is that the bounce is that it only made it to the 23.6% fib before moving back down.  That is not a 2nd wave bounce that would be worthy of 2 of 5 here.

On the other hand, note a couple of other things:
1) the DJIA chart sure seems like it would like to throwover that rising wedge.  That's still 100 Dow points from the current level and that doesn't account for any kind of throw over.  A nice sized throw over could mean Dow 17600 or even 17700.

 
2) Dow theory confirmed a buy signal yesterday according to Sam Collins.  Dow theory has a pretty good track record but it is my view that it will be part of the current signaling mechanism that stops working properly in the end game.  Indicators that used to be reliable will become unreliable.  The Ponzi pump will effectively make its own weather.


Bottom line: remain skittish but not scared!  There is a difference.  Skittish says that when a model support is broken, you sell.  You don't just wait it out hoping it will come back.  Give the bull market its due respect while at the same time knowing that a reversal could happen anytime marking the end of the 2009 rally.  It's not just going to go on endlessly but as the old saying goes, markets can behave irrationally longer than you can stay solvent.  That goes double for shorts.  Scared says "this bull will never die, I'm giving up and going long".

Note: If the unexpected happens, i.e. the Scottish vote for independence or the Alibaba IPO doesn't take off with irrational exuberance, then it could be an important sign that the bull market is over.