What to do when UVXY peaks into DJIA wave 1 down.

Sometime in the next 2 weeks, the DJIA, S+P and $COMPX are going to find a bottom into wave 1 down.  When that finishes there will be a rally which could be a good deal stronger than many bears expect.  After all, this would be a 2nd wave down which occurs after a very long uptrend in which "trust the fed, buy the dip" has been the mantra.  Many in the market have been expecting a big correction at this point of perhaps 15-20%.  They will think that the dip we are experiencing was it.  Badda bing, dip complete, back to the inflation races.  Gotta keep money in the markets else there will be no passive something-for-nothing income with which to pay Mark and Patsy retiree hopeful with.

Because of this, we shorts simply must not be too bearish during these early phases.  We have to mind set that the wave two rally could be very strong.  This is not the current concern but I always like to think one step ahead in this chess game so that nothing which happens will surprise me.  Because of that we need to remain "bearanoid" as wave 2 unfolds.  Of course, the wave count remains our primary guide in all cases.

So, while wave 2 of the markets is unfolding, what's a bear to do?

Go long the metals.  Go long the miners!  Go long oil services!

JNUG, USLV, RUSL, PBR, CJES, GASL, .  Take your pick.  Perhaps they will even begin to rally before the DJIA bottoms, perhaps not.  But once we have milked UVXY for this cycle, get long the metals and miners.  As the markets bounce, these are all going to bounce harder according to my models.  Many of the charts look like they will actually be bullish on Tuesday after the break, as if they are decoupling from the broader markets for now.

Having said that, I decided not to hold too much over the long weekend so I have UVXY but none of the above commodity plays.  They very easily could pop Tues AM and if they do I will be leaning into them without hesitation on the very first a-b-c pullback no matter how small it may be.  If these things are moving up in wave 3 next week they will likely do so quickly so as to take as many by surprise as possible.