Wednesday, March 18, 2015

[DJIA] warning watch

In the backlink I modeled that the DOWphoria would likely take it back up to the top rail and as luck would have it, this has occurred.  So the question is, now what.  Of course the truth is that nobody knows for sure but there are some things we should be looking at.

First off, I modeled the trip to the top rail as a 3 wave event.  That would make it an expanding wedge with 3-3-3-3-3 internal structure.  But I think we instead got a 5 wave event.  So the count now suggests that it is an expanded flat correction with 3-3-5 structure.

My primary model is blue but the red model remains a risk and taking the red would allow UVXY to finish its falling wedge.  This is not a requirement but it sure would put a nice bow on the wave count.  At this point I would be on the sidelines waiting to see if red or blue will occur.

It would not surprise me to see it stall until the close and then see what most people are doing over night so the market can determine if max pain occurs by breaking out or by gapping down big time.  Again, primary is blue but I'm not going to buy UVXY and hold overnight until I get some better indication what the next big move is LIKELY going to be. 

As amazing as it might seem that my model called this top rail move just before it occurred, it is, was, and always will be about odds and not about certainties.  The herd might be a creature of habit and routine but it is also a living thing.

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