ZeroHedge's recent focus on CBOE volatility and its role in the Fed's market manipulation scheme got me thinking more intensely about the VIX chart. Using Curvilinear Wave Analysis to identify rounded reversals and decisive neckline breaks, a wonderful thing happened - a textbook series of clear Elliott Waves became apparent. Once I labeled them I knew that I had discovered the true trend structure of the current market.
The dome top - breakdown - correction pattern that has been forming on the inverse VIX this year is a copy of the market action from late 2010 - early 2011. Obviously the 2012 top is higher than the top from last year, and this is where Intermarket Analysis comes into play. The all important XLF financial ETF indisputably topped in 2011. The EAFE and broad NYSE and Russell 2000 indexes topped last year as well. This tells me that the higher 2012 inverse VIX print is part of an overextended correction and not a market in an uptrend.
Here's the good news for those in search of financial reality:
the stock market is on the verge of collapsing in a devastating "c" of "(c)" wave to new 2 year lows.
INVERSE VIX VOLATILITY
MSCI EAFE ETF
METALS & MINING ETF