TVIX update

TVIX reacted nicely to the initial DJIA AM selloff today.  Most of it is self explanatory but I do want to mention one very, very important factor on this one.   First off, review the warning I provided on TVIX regarding what looked like a rising wedge (which it was). 

The fear on this was that it could be a C wave instead of a 3rd wave.  Well, today's action took away that out for TVIX longs.   The issue was that if the chart broke above the top rail and then broke down both the top and lower rails and then went back into the region of the first wave up that this entire move since $2.50 could be counted as a large C wave.  In that case, TVIX longs would be open to more shattered dreams, more ass kickings, and a lower low than $2.50.

But the breakdown into the region of wave 1 did not happen.  Instead, an a-b-c formed into wave black 4 and then a small 5 wave move upward finished off black 5 and green 1.  So the large formation is NOT a rising wedge based a-b-c corrective move despite the fact that it eventually broke back below the top and bottom rails.  5 waves up are complete and now a retracement should be expected.

So how much of a retracement.  Well, the squiggle in the middle looks like a triangle and that should be penultimate.  Thus I think the move down to $3.20 was A, back up to today's close at $3.31 was B and tomorrow we get the C wave to a lower low.

So how low should it go before green 2 is in?  Well, there are 3 likely choices the way I see it:

1. First, it could take the green path.  This is unlikely because of the volatility associated with TVIX.  38.2% fib was good support but just not enough of a retracement to be C.  So it was likely A.
2. If it instead took the red path it would not only fill the gap shown by the blue rectangle but it would also pull back to the 61.8% fib which is a respectable pullback for a 2nd wave (Green 2 remember...) vee style retracement - the last gasp of hope for "buy the dip" market longs before real panic begins.  And make no mistake: with this 5 wave move up by TVIX now a part of the chart history, panic is built into the near future. The herd is already signaling at least another 5 waves up which will be stronger than what have just transpired since $2.50.
3. The blue path would be where the entire wedge is retraced and this is a common thing for rising wedges to do.  

I think the red path is most likely but of course, just count 5 waves down after any AM little move up that might happen tomorrow and this will give you the bottom.  Remember, this is a C wave so expect some gusto, look for gaps, etc. that will tell you where the wave is in its progression.