[DJIA] and [UVXY] [GE] update

Here is the previous DJIA update and the previous UVXY update.

Today's close in the DJIA really did not help much in determining which way things will go.  The markets are set up for quick moves in potentially polar opposite directions early next week.  The blue and red models show the possibilitities.

I know, I know, what good is it to say "market can either go up or down".  But if you are thinking like this, check it at the door because it shows you are starting to get spoiled here and not in a way that has to do with gratitude but rather with getting spoon fed to the point of not doing independent thinking.  On the other hand, if you are someone who looks at this model and says "OK, that's very helpful because it tells me what I might be looking for in terms of chart personality" then kudos to you.  EW is not a crystal ball!  It can only help you gauge the odds.

So what you should be getting from the chart below is this: markets are likely at a significant inflection point and it is no accident that they left us in this state for the long weekend (Monday the markets are closed in observance of MLK).  If they open up tamely on Tues then the evolving Euroland crisis has not reached critical mass yet and so, heck, let's just rally like it's 1999. That would be the red model.  The key to the red model is that it might move up quickly like a of 4 and c of 4 did but once it has cleared blue 5 I would go on hyper alertness for the completion of 5 wave up from red 4 and when that happens I would exit any equity long positions except perhaps commodity related stuff if USO can hold the recent bottom.  I would then pile pretty much everything into UVXY and even leverage up on some margin with tight stops on the margin portion and looser stops (but stops nonetheless) on the non margin portion.

If instead, the blue count is taken we will likely see a large and unmistakeable gap down at the open as shown in blue which starts trading the day below what is labeled green 1 and then just picks up momentum to the downside from there.  Clearly in that model the high odds bet is to jump into UVXY and hold on for the wild ride. 

Because UVXY ended up breaking down its lower rail near the close after I warned about it in the previous UVXY update, I decided not to play the blue gamble but rather the red one.  Actually, it was that along with my GE indicator which suggest that it is time for a small ($1) rally in GE shares.  GE is becoming a sick animal having broke several important support lines of late so I am pretty confident that it will do the minimum retracement possible, perhaps not even the full 38.2 fib.  If it goes above the green line then this count is bust and it's time to start looking at alternatives.

If GE does the above then UVXY will likely pull back as shown but this will be likely be serious buying opportunity because it should be the prelude to blue 3 which would be a 3rd of 3rd and thus a massive move per unit time.  Of course a gap down in the DJIA will have UVXY starting Tuesday's trading day higher than blue 1.  I usually recommend people not to chase but if that happens then I will chase a 3rd of 3rd, probably buying in premarket with half a position and then the rest on the first pullback after trading begins.

Folks, the global economic world is in shambles.  It is rotten to the core and the veil of bullshit is starting to fall away.  The break of the Franc peg to the Euro was a shot literally heard around the economic world.  It shows how serious the problems are because by making this move the SNB confessed to a shitload of FX losses.  As Mish says, they gave up on the Euro as being a store of wealth and they cut their losses short.  They did what they could to be a good team player for Team Illuminati but they caved under the pressure of the smart people of that nation.  The corporations running their vendor finance "exports are a source of profit instead of just being for diversification of consumption" game just took it in the shorts by this move.  Their profits are going to collapse and so will their share prices.  This was not an easy decision to make by the SNB and they will not be going back.  They want out of the big Ponzi so that they can continue to be in charge of their own local Ponzi.  The bankers essentially opted to save themselves from the wrath of the people.  For now at least.