JNUG still not out of the woods (with UVXY insight).

In this post I provided a clear hold/sell criteria for JNUG.  As a result of this, I held into the close where I took profits at 2.70.  There are two reasons for taking profit at this point:

1) the chart is now kissing the 23.6 fib after a strong rally
2) large anomaly in the middle of a wave that is approaching resistance

As for item 1, if this is indeed a bullish motive wave 1 up then we just finished 5 small waves and should pull back to ~$2.25.  If it stops there after 3 waves then I'm back in for the 3rd wave up.

As for item 2, this could just be the 3rd wave but it could also count a-b-c as shown.  So the market is leaving its options open but in either case the next move should be a pullback.  There could be a few percent of upside follow through on Monday AM but if it is more than about 5% then something else is likely unfolding such as a stutter step 3rd wave up.

One thing here: JNUG has still been moving in step with the DJIA still and I think the recent move up in the DJIA represents the deep vee second wave that I knew could happen as detailed in this post with follow up in this post.  Until this relationship is broken (or until the DJIA proves that the bear has not really started yet), I will remain wary of JNUG while happily buying the big dips such as happened recently.  Neither euphoria nor despair shall affect my world view; the wave count saves you from experiencing these deadly trading emotions.

As for UVXY, I moved all my JNUG winnings into UVXY at the close.  If UVXY is not green pretty much from the open tomorrow then I will likely get out and wait for more charting data.  If it goes to a new low then that would have to count as 5 down which would mean sell on the subsequent bounce to the prior 4th (~24.90). 

In that case, JNUG will get the cash on a dip because right now at least JNUG and the broader markets are in step.  My back of the mind suspicion is that markets throw a hissy fit into January whereby Yellen then promises more market candy and in doing so begins to lose control of the bond market.  As interest rates rise, leveraged longs have to de-leverage.  In other words, future stimulus begins to result in negative market action.  This is the law of diminishing (and then negative returns) which eventually stops the fed from manipulating markets forever like some people think is possible.  It is not in fact possible as stated in this blog many times.
 
If this happens then gold would decouple with the markets and begin to move up in expectation of inflation.  By EWI's own chart that was written back in 2011, 2015 should be a positive bounce for M+M.

But nothing is certain until it happens and so we remain at an important (if not clearly modeled as being possible well in advance of the fact) inflection point.  Is this the pause that refreshes UVXY or is the DJIA off to the races?  My opinion is clear: Dowphoria will most likely collapse into Dowfearia in the coming weeks.  The talking heads will use the same reasons for explaining the moves up as they use for explaining the moves down.  This behavior always gets exaggerated near the turns and it is part of the reason that the herd loses confidence in the system and its propaganda outlets.  The market hates uncertainty and volatility is just another word for uncertainty.  We have had historic volatility in almost every market: currency, commodities, and stocks.

If I am right in this model, the next wave down in the DJIA and $COMPX is going to take no prisoners and leave no doubt.  It will be the moment of recognition whereby the market participants finally are convinced that something is badly wrong.  This is when we will finally see the fear and this is when TVIX heads to $8 and UVXY to $80 or more.