Bayesian Probabilities Point to SPY Washout in the 250's

Many things our Bayesian Timing daily write-ups have discussed since June 2018 have generally played out -- for example, grind higher into the 292s in the SPDR S&P 500 (SPY), the draw potential of the 300s, risk of a significant pullback over the last month or so, etc.

The paths showing up as "most likely" according to Bayesian Probability (BP) are: 

(1) A slight break of 270 in the SPY and then a push into the low 280s and then a washout to the high 250s [BP=36%]; 

(2) The low of this week-long downdraft occurred on 10/11 and then a bounce as high as 290 and then a washout to the 250s [BP=26%];

(3) A multi-month “low” is in [BP=20%]; and

(4) A long slow grind lower lasting a minimum of 6 months with targets as low as 220 [BP=18%].  

Keep in mind that our Bayesian Timing System (BTS) is not an intraday scalping tool but rather prefers to identify tradable BP setups with 1-3 weeks in mind. So if a BP path can’t be identified with enough confidence, then the signal will lean towards neutral

Although I haven’t historically posted longer-term BTS projections in the BTS room (as it is outside of the scope of the service discussed in the guide), I will be providing a longer-range forecast for the time being to put  things in perspective, as the next 12-18 months have vastly divergent opinions depending on who you ask.  

So I’ll keep this simple:  The BTS sees a BP path to greater than SPY 330 by October 2019 with the highest BPs [BP=44%], followed by a slow grind down and across for the next 12 months [BP=34%], followed by “THE TOP” is in and the world ends [BP=22%].  

Finally, a few more things to keep in mind, as I have not provided longer range forecasts in these daily thoughts before: The BPs may not materially shift for long stretches of time and if they don’t move by several %, then please don’t expect daily updates to them.  Further, in my experience with the BTS, they can and do shift very quickly sometimes, so don’t be surprised by that.  I would add that these current longer-range forecasts have been relatively stable for over six months now and the October 2018 downdraft has not materially altered them.

Luke Miller, who has developed a Bayesian timing system for trading the stock market, hosts two Bayesian timing premium services at ElliottWaveTrader.