Monday I model a gap down in the markets and gap up in UVXY so I loaded up on the dip near the close after having bailed out @$26.80 during blue 5. In other words, I just traded my own model and it happened to pay off this time. The wave count has not been difficult to spot during this bounce and I think this is the sign of conviction buying.Today we did not fully get down to the level of the prior 4th (pink 4) in order to form (2). In fact, the pullback was just shy of the 50 fib. A pullback to pink 4 would have been (and might still be on Monday) the 61.8 fib.
In terms of wave count, the herd has left it some leeway. It will likely either take the red path or the blue path. The red path represents a WC wave which is why it does not count 5-3-5 but rather 3-3-3-3-3. At least that is my interpretation right now. A break back up through the top rail would be the first confirmation that the reversal back upward is in progress and a move higher than red a would be final confirmation.
It can also happen that we have only finished 4 of c and that we need one more wave down as shown in blue to touch pink 4 before a massive reversal occurs. It would not surprise me at all to see this happen even though it is not currently my primary model. In other words, I am not using tight stops here because I expect it to bottom at pink 4 if it doesn't gap up from the open to take the red path. If it does take the red path I would expect the gap to take out both the lower and upper rails of the falling wedge in one fell swoop. That would be a clear buy signal for anyone still on the fence.
If my model is right, we have finally seen the end of the 2009 bull market and UVXY/TVIX are about to go off the hook to the upside. If I am right then we will not see Avi's S+P 2300-2500 and so I am not 100% dyed in the wool sure I am right. I have learned to not fall in love with a long term model and instead play it wave by wave (especially near the major turns!). So at the very least we should see something in the low 40s for UVXY to represent either a good sized 3rd wave or a C wave. I'll be considering all possibilities as the waves play out but for now I think the smart money is long UVXY.
For the record, I set my stops at $22.80 which is a good deal looser than I normally set them. Until the current rally has not exceeds the prior rally at ~$32.30 we cannot be sure that UVXY is even in an uptrend. In other words, the peak of mid December might have been an a-b-c retracement and the bottom on Dec 29th might just have been 1 down of Avi's move to S+P2300-2500. Thus the current move might just be an a-b-c 2nd wave. So if this goes below $22.80 they can have my shares back no questions asked and I will be looking for waves 3,4 and 5 to play out in that event. But that should be a very significant bottom because in Avi's model that is 3 of C of the big 2009 bull market.
If UVXY is not making me money then I will certainly be playing JNUG. I caught the last 6% of that move after selling out of UVXY today.
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