[UVXY] model is broken in extended trade

In the backlink I provided this model which could not stand to have red 4 go into the region of red 1.  I got an email alert in the after hours that it did just that and in fact traded down to $65.80.  So this model is bust.



A bust model doesn't mean you will lose money trading in the same direction.  It just means you are working from the wrong model and must change in order to have any hope at all of future wave anticipation.  In reviewing today's action and knowing that the old model must be wrong (even by going just 1 penny past the line: EW is very good like that - there is no slush allowance to the rules; this feature beneficially reduces their subjectivity) I came up with the model below as the next most likely model.  I like several things about it:

• Red 3 was the exponential wave.  This is what we can expect from thirds.
• When 4 is counted as a HT whose E wave failed (a bullish trait), you get 5 perfect waves up into red 5.
• From red 5 down it counts as an a-b-c.  
• Today's wave broke through the lower rail of the channel; this is typical of a retracement of a larger degree wave.  In other words, black 1 is retracing instead of still being built.
• My primary count is that black 2 ended during the extended trade today but I am open to the possibility of a deeper sell off per 2' below.   But with a pullback into the level of the prior 4th that hits the 38.2 fib of the whole move thus far, the minimum requirements for black 2 have been achieved.  Now I will be watching the wave count to see if it puts in 5 down instead of 3 and if so I will bail out when the real B wave finally arrives.

Another point that adds to the argument for this being the correct model is that the DJIA rally today was modeled as a 4th wave.  In other words, 5 waves down have not transpired yet.  As I have mentioned in these pages, big picture view is all well and good but you cannot ignore the short and medium term wave count.  So right now we only have 3 confirmed waves down in the DJIA.  That is not scary to the herd!  HOWEVER, when 5 waves down do occur, that will be when the herd knows that eventually is is going much lower.  Even if the DJIA selloff so far turns out to "only" be an A wave (instead of part of wave 1 down), that still means that after the B wave you will see a strong C move down.   The fear indicator should be revealing this in advance and I think that is why this is likely black 2.

Think about it.  If the next wave down in DJIA is 5 then the herd will know that a much lower low is likely eventually locked in.  If you know that there are good odds that your house will burn down, would you not be well advised to go load up on insurance in a panic?    If my model is right, therefore, the next move up in UVXY should be even stronger than the move up off of $25 was.

Primary model is the red one above but I will quickly sell and wait for the count to come to me before buying back in if the data tells me the red model is bust.  In that case, the blue becomes the next likely candidate.