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Gearing Up For The Next Stock Market Crash

|Includes: Invesco QQQ ETF (QQQ), TVIX, TZA

The big money is expected to be made when all three elements of my triple combination, double hedged strategy point in the same direction, something they have not done since the October swoon of last year. The stock market is expected to churn sideways when my three elements conflict, which has been the case since the rally post October bottom.

My hedging indicator has turned negative - top of first chart below - thus I replaced TNA with TZA for the hedging side of the portfolio.

That leaves the lone bull the stock market trend, which needs another week of weakness to trigger a sell. Once that happens, all three elements will point in the same direction, and we will be facing the first real profit opportunity of 2015, albeit on the bearish side.

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The economic indicators continue to weaken - top of next chart - despite modest stimulus from the FED, and it will be very interesting to see how things look next week after the ISM and ISM unemployment lines are updated.

The key in this chart from a technical perspective is the relationship between the S&P500 and slower and faster moving trend average lines. Note how red arrow sells - due to excessive investor optimism - result in the S&P500 testing the faster moving yellow line. If that fails then the S&P500 quickly drops to test the slower moving purple line. If that fails to hold, we have the set-up for the start of a bear market.

The S&P500 is currently sitting smack on the yellow line, deciding if it wants to go to the purple line, with what happens there likely to confirm either the start of the next Great Bear phase, or the next great buy the dip opportunity.

Overall, everything but the trend says a hard reversal is in progress, thus conservatively invested long while hedged with TZA and TVIX is the optimal trade.

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Disclosure: The author is long QQQ, TZA, TVIX.