TVIX update

Here is the backlink.  If you open the model chart on that page and compare it to actual below you will see that the model was reasonably correct and in fact remains intact.  The red lines coming off the bottom in that link were not meant to imply "we go up from here in a straight line forever" but rather "this is the near term bottom which will now reverse and begin to trend upwards".  Of course nothing goes straight up or straight down.  Smart traders will always use stop loss sell orders in something like this, especially if we begin to see heaviness in the chart after a big move up and especially after the completion of a long trend in which the possibility of a deep vee second is high.

By my count  we should be at or very near the low of wave 2.  I would not be surprised to see one more move down to the blue line in order to get the inclining double bottom angle into the norm but it could take off from here as well.  I'm playing this with UVXY but since my last model showing this final downward push into early Dec was done with TVIX I decided to follow through using TVIX in this post.

$COMPX update

Here is the backlink in which my model pretty much captured the direction change but not the full severity of the decline.

The model has since hit a higher high indicating it was a C wave.  In any case, I think $COMPX is at a critical juncture again.  As you can see from below, the blue line creates a potential neckline on an inverted head and shoulders (even though I an not thrilled with the lack of symmetry between the shoulders). 

I have seen these break above the neck line and then break back down below the neckline again, thus invalidating the pattern but it generally happens very soon after the breakout or break down.  In other words, this has to change direction within 1-2 trading days or it is likely going to head up to 5000 and UVXY/TVIX will certainly get much lower lows in that case.

If the leveraged vix is not ready to pay off, don't force it.  There is always another play.  JNUG for example has been paying off nicely following the bottom that I recently modeled.  RUSL should be good to buy on a dip too. 

IF $COMPX  makes it near 5k then I think the psych barrier would be ripe for a major pullback.  Of course this could turn into a double top right here, right now as well.

GDX Update

Here is the backlink and it seems the blue model was taken almost exactly so far.  If I'm right about this, this double bottom will lead to much higher highs for GDX, GDXJ and JNUG.  I see USO bottoming soon and the dollar at a peak right now.  So again, at least the early portion of Q1 of 2015 should be great for commodities.

Up until now I have been modeling the early Nov low as 5 and then the spike into late Nov as wave 1 with the recent deep vee as wave 2.  This is the conventional wisdom count and for now it is fine to stick with it.  But based primarily on my W3 indicator I will be wondering if the coming move up is really wave 3 or just C of 4.  C of 4 would imply a lower low into 5 down and it would enable a shot at Avi's GLD $105 ish target.  The other factor that makes me like this count is that several days of sideways chop in the build up to green a.  That easily counts as an a-b-c.  If the wave that is forming right now cannot make it above about $19.80 then I can also begin to suspect that a HT is forming here which will eventually break to lower lows.

For right now, I like JNUG unless it falls below the corresponding green B on its chart (which is still completely messed up in TDAmeritrade StrategyDesk to the degree that it is useless here).

USO update

Here is the back link to the larger model.  USO has fallen more than modeled there but it should be no surprise when wave 5 falls below wave 3.  That was supposed to be a rough directional indicator only.

In any case, I don't think a bottom is quite in yet as you can see from the updated and more detailed model below.  The top of this wave was an e of 4 throwover.  It looks like the bottom could be around $18 if 5 ends up the same as black 1.  The subsequent bounce should be to the $40 level.  Russia will benefit from this coming bounce so be sure to think about buying RUSL on the significant dip.  Don't buy the peak!  Never chase IMO especially if you are leveraged in any way.

interest rates need to turn up sharply for current model to remain valid.

Current model was discussed here.  Here is the near term model chart from that post.  Note that it expected a tick up and then a couple ticks down before turning up with gusto.  Importantly, red 2 should not fall into the region of blue 1.  This is not a rule violation to do so because we are talking about a 2nd wave of smaller degree, not the 4th of current wave.  Still, the 1-2-1-2-3-4-5-3-4-5 model is supposed to see significant strength during 3 of 3, not overlapping retracements.



As you can see from below, you can now see 5 tiny waves down and then a sudden tick up and then the start of move waves down, but angling down slowly, at least so far.  A normal thing here would be a move down to just above blue 1 before moving up with gusto.  The chart could legally but should not move back down into the range of blue 1.

Since this whole thing can also count as an a-b-cup tp $23, I also annotated the ohart with what a HT might look like should that top rail not break out within about 1-2 days tops.  Falling interest rates would support Avi's bid for S+P 500 to the 2300-2500 range to finish off wave 5 of 3 up.  But if rates break out per the red line I think it forces asset managers (that's what we call institutional level, massively leveraged gambling these days...) to deleverage.

So we have some nice triggers and guidelines in place on this which can help us to interpret other charts.

Larger wave count for 10 year treasury rates ($TNX.X)

A reader comment to this post asked about interest rate projections for wave 3 of TNX.  The following model shows both that projection as well as my alternate count for treasuries.  EWI has not presented the alternate count shown below but I notice of late that they come up with a count and then stick to it until far after they should have more publicly considered and presented alternates.

The red line is the primary model for now.  It uses the black numbering.  So, wave 5 down was mid 2012, wave 1 up was late 2013, 2 down finished in Q4 2014 and now currently tracing out 3 up.  There are things I like about this model but it is not confirmed until it negates the potential 4th wave HT model that I also show but in blue numbers and lines.

If the chart finds resistance around the 3% level then I will get concerned that the conventional wisdom model is wrong.  The confirmation of this would be a break above that top line and then a plunge back down into the channel as shown by the blue line.  If that occurs then it is a clear indicator that the real 5th and final wave is playing out because HT are always penultimate and this is a very large pattern, not some transient day trade flash in the pan.

In any case, both of these models suggest rapidly increasing interest rates in the near term.

Important TNX (interest rate) update...

Here is the backlink to my prior $TNX.X post.  The model there looks correct so far.  In other words, interest rates have begun their 3rd wave up and appear to be about to pull back one small wave before skyrocketing into a 3rd of 3rd which I suspect will gap up.  Below is the updated model.  If the wave goes higher than the blue line, EW will know that the falling wedge was WC and not W3 because if W3 then this would be wave 4 which cannot go into the range of 1 (which is what the blue horizontal line marks).  But EW are few and far in between relative to legacy TA and if they see a higher high, that is when they will react and that would be the orange line.

IFF my count is right here, we should see a gap up soon as 3 of 3 unfolds. 

If this happens, the gap up will generate the moment of recognition for the herd that the fed is not omnipotent like everyone (including investopedia) incorrectly thinks it is; the market leads the way in interest rate moves, not changes to the fed funds rate or any other thing that the fed does.   So all those promises about keeping interest rates down for extended periods going forward will quickly fail and the G23 Pax effect that these false promises have been having on the markets should wear off suddenly as the leveraged longs realize that they have been conned by the fed. 

I think that the fed has in the past leaked this kind of important info in the past but this time, because of the new conservatism that is spreading like wildfire, the fed is actually behaving honestly and not cheating like it normally does. Again, not because it turned honest all of a sudden but rather because they are very afraid of getting caught peddling insider information.  This could land them in jail and that would be a brain death for the academicians.  It would be worse for them than actual death.

Again, IFF I am right about all this wild speculation, it would really piss off the leveraged fund managers who have been counting on those tips in order to get positioned for a turn.  I think they will get blindsided this time.  We will know that is the case if the selling of the markets suddenly and without news begins to get crazy; it should be as if someone didn't get the proverbial memo.

Keep  in mind for the future folks, that it will not be shorts crashing the market.  All the shorts are shut down in disgrace.  It will be the leveraged longs bailing out.  They control these markets.  It is really, really difficult to get the kind of leverage short that you can get long.  For example, the federal reserve is leveraged 75x right now.  Even with deep out of the money puts it is difficult to find that kind of leverage.  But it is common place for longs.  So when people start cursing the evil shorts, just laugh at them for their ignorance about how things really work.

Perhaps this is why the DJIA and S+P continued to higher highs while the small caps and the $COMPX could not.  Perhaps they are more sensitive to interest rates somehow.  I'm not sure about that, just speculating.

The effects on the DJIA should be to drive it lower.  Since gold is fractionally reserved by the market in order to increase their leverage on the long side of stocks (technically being a short sale of gold), unwinding the stock position should cause the gold short seller to cover.  But let's not get ahead of ourselves.  The 3rd wave up is not even confirmed yet.  TNX could still be experiencing some kind of 3 wave corrective move.