Critical TVIX Update

Near the big turn we have to expect market volatility.

In fact, the higher the volatility at times like this, the more assured we can be that a big turn is near.

I've written it so many times in advance that it should not need to be said again.  The herd is trying to shake the predators before committing to a big new change of direction.  But the direction change is coming, zero doubt about it; the massive swings in big name stocks and in major indices and in important industries like gold mining tells us so.

The main goal for general market shorts during these times is to minimize getting kicked in the face by an unexpected hoof.  You know, the bloody, debilitating, account-crushing face kick that those who are long metals and miners are experiencing right now.  Of course, the TVIX pull back from $6.15 down to a recent low of $2.75 was also a big kick in the face for those attackers who got in late and who didn't know when to let go...

So today it's time to discuss the action in TVIX again.  I've already given proper due to the long case for the $COMPX and the bullish potential for a big player like APPL so it's not that I am in any way discounting the potential for a final very dangerous bullish thrust.  I will be a bit surprised but not amazed or shocked by it happening because the wave count does allow for it.  But it currently is not my primary model. 

The action in TVIX currently suggests that it is still a retracement and not the start of a new big wave down.  If AAPL went to $150 or $COMPX went to 5000 then TVIX would get crushed to $2 or perhaps even lower.  But a funny things happened since the mid October market reversal: while DJIA and $COMPX went to higher highs, TVIX did not fall to a lower low.  In fact so far the chart looks to be forming a large falling wedge that, if subsequently broken out of, would count nicely as a C wave.

This should be of significant interest to TVIX longs because TVIX is based on short term options and thus it should have lost a lot of time value since the Sept 19th low.  Since the markets have put in a new high yet TVIX has not put in a new low, that is bearish divergence for the markets and bullish for TVIX.  That is not gut feel, that is a fair analysis of the actual data.  It might not turn out to be correct analysis of the data but neither will it have been the mistake of using gut feel or hope as a strategy.

In other words, a lot of evidence exists right now that this wave is just a very large vee 2nd.  This is my primary model.  It would work best if we got one more small move to the upper rail and then down to $2.70 (the target of the inverted H+S I warned about in this post) before breaking back out the top rail of the falling wedge.  That wedge could then be counted as a C wave in line with my view that wedges are 3rds or Cs.  A break out above the level of the prior 4th (~$3.12) would signal further bullishness and I think the momo players would be all over it.

But it would also work if the blue path were taken.  Any break out of that top rail has to be viewed as a potential breakout for the ETF.  If you buy that breakout, just set stops a very small amount below your buy price and move on with your day.  Let the market do all the work and absorb all the stress.  Even if you come back at the end of the day to find that it moved down and took out your stops and then rebounded strongly, that should not be considered a big deal.  Very few will catch the exact bottom and very few should be expected to do so.  The main goal is to be on board when this thing proves that it has reversed upward because if $2.50 holds as a bottom then this move will have been proven to be a 2nd wave.  That means a 3rd wave is next.  Given how quickly the markets moved from their mid Oct lows to new highs, it means that these shares likely exist in weak hands.  Thus, the next time the selling begins we have to expect strong wave action down for the markets and thus 3rd wave action up for TVIX.