ETF Watch: Two Scenarios in Play for SPY and GLD

Another shallow pullback in the SPDR S&P 500 ETF (SPY) on Monday keeps two scenarios of ours on the table. In the first scenario, a “brief” pullback up to 3 trading days ensues that then targets 286-288 in the SPY before a more meaningful pullback.  For counting days use day 0 for July 27. 

In the second scenario, which has a slightly higher probability (56%), the SPY sees a pullback correcting more in time than price (up to 7 trading days) that then goes more directly to the low 290s.  

Both of these paths consider a relatively shallow correction in price with the “uh oh” moment not arriving until a break below 276.

Moving on to oil, the vibration high on July 3 has held, and our Bayesian Timing System (BTS) continues to see this as a wave B top with targets in the low 12s and possibly the low 11s in the US Oil ETF (USO) once this bullish sentiment clears out.  The corrective retrace higher over the last 9 days continues to grind higher.   

In metals, the weak close on Monday tipped the scales back in favor of the second of our two scenarios.  In the first scenarios, the low of the day (LOD) on July 19 in the SPDR Gold Shares (GLD) was "it," but in our second, with a 51% probability, there is one more modest low that would be a false break of the July 19 low.  Either way, the low is close.  

Keep in mind that other paths could emerge, but from a simple interpretation perspective  above 117 in the GLD helps "a bunch" and above 118.50 helps "more than a bunch."  Above 118.50 and a re-challenge of important resistance at 120.25-120.75 needs to be cleared. The multi-month "all clear" won’t be achieved until a daily close above 121.50, which should begin a rather straight up shot to as high as 133-135.  

In natural gas, the US Natural Gas ETF (UNG) finally got that close again above 22.50, so the BTS is seeing a shot at 23 on deck.  Higher targets up to 25 are still very much on the table. 

Among other ETFs to watch:

DBA: The basing area of mid-July still presents as a multi-week to multi-month bottom with DBA back above 17.50.  A run at 18 seems most likely.   

XLF got above 28 as expected -- above 28.35 and XLF has a path to 29 in short order.

EEM had a successful climb above the signal trigger price and solid press higher.  The push to 46 should be upon us; and any retests of the 44 level could prove worth your while.

UUP:  Can’t argue that the signal trigger price has been good in identifying a multi-month topping area – now let’s see that action down to the low 24s.

XME: The 37 level caused a consolidation, and above 37 still targets 38.50. 

SMH: SMH hit the 108 level as expected; and consolidates off that level.  Sustainably above the 108 level begins to seriously look at 109.50s and then 111 and then all-time highs.   

XBI: The BTS likes this staging area for a press to all-time highs.  Giving back some below important long-time resistance turned support is not ideal; however, one day does not make a trend.  If this is still basing for all-time highs, then getting back to the signal trigger price should happen sooner than later.

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