Monday, March 23, 2015

[UVXY] update

Here is the backlink and below is the main model from it.

Here is the alternate model from that same post.

Today's action pegs it somewhere in between still with no confirmed outcome as of yet.  Because of this I have combined the model going forward into a single chart model with red and green paths below.  The herd has full freedom to go either way at this point.  A serious breakout of the top rail (i.e. one done with gusto) will likely tell us when this bottom has been reached.  I'm hoping for the red path but I will buy the first a-b-c pullback from the green path should it occur.

For those who may be new to my blog, please review this post from March 12th in which I clearly documented in advance with my EW model pretty much exactly what has since transpired.  Still, there is an element of chance in this so the real skill in EW trading is not creating the high level models but rather understanding the likely risks as well as the opportunities and then positioning oneself to take advantage of them.

So the model above expects a reversal "soon" in UVXY, but there are options that the herd has as we can see from the zoom OUT below.  Here we see a large falling wedge which just kissed the middle tine of Andrew's pitchfork on Friday.  Then, even though the DJIA was green for most of the day, UVXY did not make a lower low.  Since center channel is a common way for these falling wedges to terminate, we have to BOLO for the green path.  Again, a break of that top rail in the circle would be a first indicator that UVXY is heading north.

Zooming out even more, we get the model below.  I'd prefer to see the red model but if we break the upper orange rail then we could extend the market madness into May.  But there can be little doubt that these markets are very overbought and that eventually UVXY will see again, as a bare minimum, the level of the prior 4th which is ~$56.  While all of these high level models are of course subservient to the low level wave counts, it's still useful IMO to have a view of the likely big picture.

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