Thursday, March 26, 2015

[UVXY] update

At the backlink I provided this model:

As you can see, the chart ran right up into the expected resistance area and then did an intraday reversal denoting short term bearishness is in effect.  There are two ways the can play out.  The first is my primary model as seen below which says that we are now working on the 5th and final wave down.  The alternate model, which I do not show in chart form because I view it as only 20% possible, is that what I labeled green W3 was in fact 1 of 5 down.  If this is the case we should see some very dramatic selling occur in UVXY very, very soon. 

But if my primary model is correct it is more likely that we see 5 waves down that does some kind of double bottom, perhaps one that is slightly inclining and which back tests the falling trend line from above as shown below.  Only time will tell of course but I sold at almost the exact peak ($16.70) by carefully waiting for the upward wave count to play out and then selling into the 5th of 5.

The first test of this model should be wave blue 3 down where I expect some people to jump in believing that 5 up and then 3 back to be a buy signal.  But that count ignores the fact that the dip on the 24th was only a 3 wave a-b-c fall and thus quite unlikely to be the real 5th wave down.  Expanded flats are often seen in this wave position because of the confusion and whipsaw that it causes.   Of course I could turn out to be wrong here but the odds favor reading the waves exactly as they are and not as one would hope them to be.

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