There are two types of tops/bottoms - the first is the most common which is a simple swing, basically defined as nothing more than a wave leg within a larger wave count. So, if you have a 5 wave count up, let's say, you'll get a wave 1 up, a reversal creating a swing top off that wave 1 high, then a pullback wave 2, a reversal creating a wave 2 swing low, a larger 3rd wave high, creating a wave 3 swing high, then a 4th swing low setting up a final 5th wave leg higher to end it.
Now, when you get an end of a larger move, or a completed wave count (5 complete waves), those types of tops/bottoms are phase tops or bottoms, ie, distribution or accumulation tops/bottoms. They don't just turn on a dime like normal wave swings. They drag out over time, say a month or so. Then they slowly shift direction and setup your new wave count in the opposite direction.
I think that's where we are now looking specifically at the Q's and combining that with the bullish% index readings which clearly suggest a massive completed wave count pattern right here, right now. The Nasdaq has an upside final target around 2550, and the Russell around 750 to 760.
Now this should lead to a large ABC correction. But, and I stress 'but', I think this move off the March low is a wave 1 of a new secular bull market. Wave 2 pullbacks many times will retrace as much as 76%, or bringing the SPX possibly back down below 900 again sometime. A 50% retracement will be right around 900. When you consider the fact that the capital gains tax and dividend tax cuts expire the end of this year, the selling could be big. Also, if China revalues their currency higher, which is supposed to happen, that could destroy their stock market, which will have a big effect on ours. So, sell in May and go away might be a bigtime thing to live by this year especially.
I think TZA will run to at least $14, giving us a better than double this year bringing our account to well into the $20ks. As soon as it starts trading into the $9s, I'm going to start shorting calls against it. I'm personally a big buyer of TZA right here in the $5s as the Russell now trading over 710 is probably 40% overvalued. A 10% market correction will push TZA well north of $10, but I think any substantial decline in the market of 1000 points on the DOW or more could send those investors waiting to see how high the market will go before they pull the trigger to beat next year's cap gains tax increase piling out trying to beat each other out the door.
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