[DJIA] {UVXY] update

Backlink.  DJIA model from that link is below.




Friday's selloff left little doubt that the green path of the above model is most likely correct.  In fact I wrote in the backlink:

"Three models are presented below for the very near term.  In the green model, breakdown begins tomorrow and we know it is upon us by a break down through the lower rail ... There is nothing on the chart which hints to me at which it will be but I bought back into UVXY at the close simply because it was down 4% even though DJIA, $COMPX and S+P all closed red.  This is the kind of divergence that one sees near a trend change.  It is not any kind of hard or fast rule, just an observation.  So I bought back in at $10.57 during extended trade. " 


While DJIA closed only ~280 points down, the peak dip on the day was ~420 points.  The chart fell through that lower rail damned near at the speed of gravity.  There was no hesitation in this sell off folks; whoever was doing this was conviction selling / cutting and running.  This is what margin calls look like IMO.  Look at that nice little 4th wave triangle and then the a-b-c retracement back up to it.  Talk about text book Elliott...

So while someone sure was selling, the herd was still in buy the dip mode.  You know, that same strategy that has worked like a charm since 2009.  That strategy that counts on government bailouts to support ridiculous levels of margin debt lending.  That old Bernanke put.  The VIX fear gauge bumped up a bit during this selling but certainly there was no widespread panic indicated yet.  In addition, the volume was not very high, just a bit above average. 

So again, the price move tells me the early movers are bailing out but the remainder of the herd is not yet convinced that it is time to wake up and start running.  If my EW model is correct this should begin next week.   In other words, the model says that from the March peak we have had the triple stutter step: 1-2, 1-2 and then just today alone one more level of 1-2.  That means Monday we should see a big gap down from the open as 3 of 3 of 3 plays out.  I doubled down on UVXY at the close in anticipation of this event.

When VIX pops 10% in one day or more and UVXY scores 30+% in one day as a result, that is when we can start talking about fear returning to the markets.  This will not happen until the DJIA falls below ~17560 which will represent a lower low for the DJIA.  At that point, a Dow theory sell signal should have been confirmed and old school TA is likely going to react.  I think that it must take the power of a 3rd of 3rd of 3rd to do this and per above I expect that to happen on Manic Monday the 20th of April 2015.

On the UVXY front, here is the model from the backlink:



Today's action seems to be taking the red path so far.  Per my model above, this eventually ends up in a lower low.  By not breaking back up into the body of the falling wedge, the herd has shown that it has not, so far, viewed the DJIA sell off as being a reversal.  The herd is still trying to leave its way clear for a move lower in red as shown.

When I zoom way in close, the data is just not as clear as I need it to be in order to get a 100% clear count on this recent UVXY move.  While the DJIA chart seems clear, the herd did a good job in leaving UVXY murky.  Still, with today's gain in hand I would be able to lose 3% at the open on Monday after having doubled down and still break even from my last buy point so I have the luxury of holding over the weekend.  For now, I'm going to select the green path above as my primary count based mainly on my DJIA model more than the low level UVXY count.  It will be settled Monday at the opening bell.  The markets either gap down at the open or it is likely that my DJIA count is wrong somehow.  If that turns out to be the case, UVXY exposure would be to the downside as shown.  This could turn into a 4th wave HT for UVXY if it does not gap up Monday. In that case we should get a better read on the real UVXY reversal.  In any case, I think it is coming soon.