$COMPX update

I've had a chance over the weekend to really sit and think about the action in $COMPX last week.  I have to say, action was a lot stronger than expected.  One would think the breath was slowing down, etc. into the 5th but it was strong again on Friday (which started with a big gap up).  Bottom line, I would not fight this action.    Look for signs of weakness before committing anything and of course have SOME kind of wave model to work from.  My latest wave model for $COMPX is below.  Note the unprecedented rise on the weekly chart.  I mean, it went almost straight up after hitting the lower rail. 

Its like either someone got very scared that letting it break down would have resulted in a collapse OR the buy the dip crowd saw it as yet another great opportunity.  In either case, the reason doesn't matter.  All that matters is capital preservation for when the crash really begins.  I model that we are now in 5 of 3 of the big 5th.  Or it could be that 3 is subdividing.  Look at the 5 wave structure on the weekly.  I assume that is not going to end up as 1-2-3-4-5 but rather 1-2-1-2-3-4-5-4-5.  In other words, and extended 3rd.  I see 2 big gaps in the sequence as pointed to by the blue lines.  They could be 3 of 1 of 5 and 3 of 3 of 5. I think that the chart would model best if the $COMPX headed all the way to the top of the channel if not above it for a quick throwover.

This wave is not even bending over to the right yet.  It's like a rocket ship straight up.  I think that means that it was not hard won and thus it will eventually not be hard lost.  It would not surprise me if this was mainly retail buying and that institutions were distributing.  After all, Greenspan is telling the economic world that the federal reserve balance sheet is a tinder box waiting for a match to burn it down.  All it will take is higher real interest rates for that to happen.  All it will take is for the fed to lose control of the bond market.  So watch interest rates, they are the key to the future market direction.  And of course I don't mean the mostly symbolic fed funds rate. I'm talking about the 10 year treasury here - something which the fed has admitted over and over many times that it does not control.

Bottom line: don't stand in front of the speeding train but also know that a vee top is possible so keep trying to count 5 waves up here and don't forget to expect that one of the 5 waves will likely be extended.  One more thing, the red vertical bar shows the length of wave 1 so it should also serve as some kind of guide for wave 5.