Mini DJIA Intraday Rally Review

 

YMMY16-May-7-2016

Shortly after the employment reports came out the DJIA turned and started to rally. I guess that means all is well in the economy and stocks are going to soar!  If stocks are going to soar, then the HDGE ETF is going to implode, as it acts inversley to stocks.

I will talk about HDGE more below.

Apple barely moved so if there is no hope for Apple then there is no hope for the DJIA.  This decline is not a healthy impulse decline, as I am having to struggle with an impulse wave count. When this happens, I must assume the we are in some diagonal.

I have an “E” wave at the very top in Minor degree, but I think that is not going to last that long.

The problem with diagonals is that they can decline like this for a long time, driving us wave counters nuts. Sure, we had a sharp spike to the downside, but that one was pretty small for what I would like to see in a bigger reversal.

 

HDGE-May-7-2016

 

HDGE came to a screeching halt in the last days of April, before it turned and headed north while stocks headed south. This ETF will not react on a dime like futures will as futures are leveraged and act far more violently to news.  For stocks to continue in a big bull market, HDGE would have to implode and head closer to zero.  At $10, HDGE doesn’t seem it would have that far to fall and we could think that a major bottom is close at hand, until they inverse split it. If they did this 3 times, then this $10.75 ETF would be at $32.25 and then it would have much more room to keep falling.

I have seen this happen many times and no stock or ETF is immune to this. Any price getting to $5 and lower is a prime target  for inverse splitting.  With HDGE going vertical a correction should be due, and it is this correction that can help us determine if stocks are going to push much lower. I will be looking for an “ABC” type crash which will tell me that another leg up in HDGE is going to happen.  How far any move can go this time around remains to be seen, but after a correction I will turn more bearish on stocks.

The VIX has made a dip, but would head further south if stocks still have a bit of steam left in them.