Inverse ETFs & shorts are set to FLY!

Transcription

1 Friday, Nov 6, 2015 Inverse ETFs & shorts are set to FLY! In the Big Picture Bear Market, you will note that bearish legs A & C since 2000, have initiated with this echoing Diag II, the same structure as the larger whole. The effect of the Diag II is analogous to a spring being tightly wound to pack energy and momentum, so that when released, it jets down with tremendous force. The Diag II further demonstrates the fractal nature of markets. Just as many forms in Nature, the larger whole is repeated in its parts. The structure remains the same, regardless of how much it is magnified, shrunk down or inverted. Page 1 of 8

2 As indicated by the large arrows in the diagram below, a violent trajectory Spikes down to complete the Bearish Diag II. Meanwhile, an equally vigorous bullish Spike in inverse funds mirrors the plunge. Unlike ordinary 5-wave impulses, corrections pause rather than retrace between 32% and 87% of the previous downside move. For inverse funds this means a roaring Bull Market unlike any before. In the S&P, waves 1 & 2 within the Diag II are complete. In inverse ETFs, these translate to the identical structures, but rather than propelled by greed, as in Bull Markets, they are driven by a far more vigorous primordial fear of survival. The 2-hour interval charts below provide a magnification of the larger structure, allowing us to recognize the larger structure s fractal, just as a scientist would identify a pathogen under the magnification of a microscope. The SPX has completed the Wave 2 upside, the a lower degree a-b reversal in process will usher in an avalanche notice the upside price territory marginally Page 2 of 8

3 exceeded our target at the dashed green line. Those were the last 5 waves to complete the C-wave of the a-b-c wave 2. A full scale free-fall to a new low into wave 3 follows imminently. Most other charts are at comparable progression, or have already reversed to dive as shown in the dashed, vertical red arrow on the far right. Although the Bearish Diag II is the most bearish of all configurations, (only exceeded by multiple reputations and more massive structures,) the uppermost is typically retraced in a sucker s rally to appear as if all is well, while luring-in the unsuspecting investor, who becomes fully invested, just prior to the plunge. Keep in mind that the purpose of a Crash is capital destruction, just as capital creation is endemic to bull markets. As always, the valuation pendulum swings to both extremes. UVXY the VIX Volatility Index ETF (inverse S&P) Just as the S&P above has climbed to stratospheric levels, and is three times overbought, as highlighted by the red circles in the lower RSI chart. Rather than compared with the overall market, Relative Strength is measured against each stock or index s price history; above 70 is overbought, below 30 is considered oversold. Page 3 of 8

4 All Diag IIs fill-in the gaps before moving higher to fulfill their destiny. In UVXY the a gap just below 25 was filled in on November 2 this was the last one.as you see the evidence is mounting as the long charts confirm a completed upside. Just as the next move in long ETFs is a bearish wave 3, so is the upside a bullish wave 3 in the reciprocal, inverse ETFs. Below is the Volatility Index ETF, completed wave 2 of a 5- wave Bull Run. Inversely correlated Gold lags a bit. We can expect gold to trough at approximately $1,090. The fact that gold is lags does not detract, but rather confirms the disconnect between investor perceptions and reality. As you see below, the large, bullish Diag II presages the expectation that gold will soar to a new all-time high, yet such a move cannot occur in a vacuum. From 1979 to 1999 Gold was in a Bear Market. The next rally will be a Page 4 of 8

5 B-wave, essentially part of an A-B-C Bear Market, yet like the B-wave in stocks from 2009 to 2014 the upside will be interpreted by most as a new Bull Market. Above you see the inversely correlated S&P in blue, versus Spot Gold in red & black candles. As the market plunges, gold will surge in a substantial Bear Market Rally. Below in Daily Gold you see the large Diag II echoed in a smaller repetition the effect is multiplicative in its result. Beginning in August, the a-b-(a), a-b-(b) in Daily Gold relates a transition to a higher magnitude to fuel the subsequent Spike at a scale not seen since Page 5 of 8

6 Inverse Emerging Markets have begun a Bullish Wave 3 Inverse China, YANG has transcended magnitude after the wave 2 correction, for a vigorous wave 3 upside. Page 6 of 8

7 FAZ Inverse Financials have completed the wave 2 correction, next is wave 3 rally. Wave 3 is often the longest and strongest & at least x the perpendicular length of wave 1. TZA Inverse Small-Cap Stocks, as with the other inverse funds, small-cap ETF has completed wave 2 of a 5-wave Bullish upside. Page 7 of 8

8 In summary: Inverse equity ETFs are all set to fly, gold too is positioned for a near-term Spike with just a small lag. The long stock indices including the SPX at the edge of a cliff soon to plunge. Eduardo Mirahyes Page 8 of 8