Date: October 2012: XIV: Follow up of the short-term EWP | The wave trading

I believe that XIV is going to give us worthy information regarding the direction of SPX corrective pattern which should be still down.

There is no doubt regarding the correlation between XIV and SP, therefore if the XIV correction is not over we have 100% certainty that neither SPX has completed the assumed Double Zig Zag.

Given the steep down leg from the October 18 high (which is common to a completed Ending Diagonal) I am confident that price will unfold at least one more down leg which could aim at the range of the 0.382 retracement = 14.62  and the gap at 14.39

If price has in mind a Zig Zag down then my short-term SPX scenario that calls for one more down leg in order to complete the DZZ will be considerably strenghtened.

Volatility instruments usually when they move they move with violent spikes. And if the  SPX missing wave (C) down is the candidate to establish the end of the corrective pattern in force since the September 14 high then it is reasonable to exepect a spike of VIX and consecuently a violent sell off of XIV. This is the result of the intensity of the emotions of the investors.

For short-term time frame if price breaks above the immedate resistance at 16.62 then the assumed wave (B) rebound should top in the range 17.27 – 17.49

The following wave (C) down should at least match the 10.54$ drop of the wave (A)