If the markets gap down on Monday [they did not gap down (futures were nearly flat at the open) but they accelerated downward pretty quickly after the open] then I am going back into UVXY big time at the open [I did so as the DJIA hit a lower low than yesterday. I set my stops at my buy price of $25.60]. Why? because the odds will have shifted away from us seeing one more red wave up if the channel shown above is broken down decisively. If that channel breaks down and is not immediately retaken by the longs then Katie bar the freaking door because a 3rd of 3rd down will be upon us and my next S+P 500 target would become 1950 before we even have a glimmer of a chance for a reasonable market bounce. [Very shortly after I bought UVXY, it reversed and broke below my buy point so I got stopped out of my entire position. Did I mention that I love the stop market order? It saved my bacon on RUSL today as well. USE STOPS!]
If they don't gap down at the open on Monday then I will bail out of my weekend 1/3 position of UVXY and only get back in if we see a lower low than today's close. If we don't gap down on Monday's open then I expect an S+P move to just shy of 2100 on the S+P. Can anyone venture a comment as to why I pick that number (and not just "because that's what your chart indicates"!).
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So I let UVXY fall into the afternoon but then I bought back into it in the extended trade at 22.38 with a 1/3 position again looking for, at the very least, a run to $26 based on this count. I could be a little early as shown by "or 5" but I'm not heavy on it so I'll see what tomorrow brings.
In addition, as long as the DJIA stays below the heavy blue line then the recent action could still be counted as a 4th wave to be followed by a 5th wave lower low tomorrow. I am not saying that must happen of course because nobody knows for sure. But I do know that if DJIA goes above the blue line even by a penny then I stop out of my small UVXY position and then sit and watch until I can re-acquire the correct count. A fall below the red line signals that the bear is on and that my UVXY position should be added to on its first significant 3 wave correction.
Because the wave structure up from the bottom is so non-motive looking (remember, my current model expects a motive 5 wave move up to form blue 5...), I am now considering an alternative count as shown below. In short, it extends the 4th wave HT paradigm by inserting a large a-b-c in the c wave. This is the other reason I ventured to buy into UVXY in the AH trade. Time will tell.
2 comments:
Cap'n, where were your RUSL stops? I went in last Friday as per your "Buy the pullback on [RUSL]" post. Still holding it, btw.
Steven B.
My model was that the 3 wave pullback on Friday was an a-b-c. I thus expected the gap to be up Monday AM and not down. So I set my stops just below Friday's close. Of course, instead of getting stopped out at $20.10, I got gapped down to ~18.50 and then let off the train. But that gap down was a sell signal to me, certainly a 3rd wave. Thus I did not need to be around for the 4th or 5th, best case. Worst cast it could be 3 of 1 down. The chart is now caught between buy and sell signals. Above $16.25 should be a buy signal and below $15.45 is a sell signal.
So now let me ask you something. Where were YOUR stops set? If the answer is "no stops" then that is the wrong answer. If you are not comfortable with your EW buy and sell triggers, my rule of thumb is this: if you lose more than 3-4% then you are into something you don't understand. This is not a crime not to understand it but you are playing the game letting the house odds push you around. Over the long run the pros will take your money if you play it like that.
When you get into something you MUST ALWAYS have an EW reason to have done so, no exceptions. Once you have the EW buy reason then you also have the sell trigger. Set the stop right after buying. That way as it is going down you don't have to fight emotions to sell for a small loss before it becomes a big one.
Note: if RUSL falls below $14.50 then it could well hit a lower low. In that case, count the waves and when you see 5 down play out, jump back in and use stops. You might get stopped out 2 even 3 times if you are trying to catch the exact bottom (which is how I like to play this game). But when it does hit bottom you will be there for the big move like we have seen in JNUG, etc.
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