Tale of Two Paths

As we’ve discussed with members many times, the Bayesian Timing System is a continuously learning system.  As time progresses and more information is gathered, the more refined future paths become. Building off a few posts in the Trading Room on December 4, three paths have become two paths.  In theory, this is ideal for the BTS and trading opportunities as it's either Door A or B, at the present time anyway:

(1) [Bayesian Probability=56%] Bullish: SPDR S&P 500 ETF (SPY) found a longer term bottom near the lows on Oct 29 and Nov 20 and price will begin a bullish leg higher to the 300s.  More specifically, the BTS sees a target of 300-320 into Q1 2019.  But more on that IF and when path 1 occurs.  

(2) [BP=44%] A bear market of sorts has begun dropping well below 250 (with no immediate recovery). This path is expected to last months and have bearish attributes of a 20%-30% correction from all-time highs.  On a micro level, the vibration window delivered the relative high on Dec 3, as discussed and expected in these daily thoughts.  The bulls could see the rubber band stretch down to 255; but preferably stays closer to 259 than 255.  As such, the “bottom” to this most recent sell off could be anywhere between the Dec 4 low (SPY 270) and 255; and the bulls still have a BP tradable chance for Path 1.  

As a side note, at the time it was curious to me why the BTS went Neutral last week.  However, in hindsight the evidence began stacking up for at least this one more scary drop with information from VXX and how the price level of 271 showed up late last week, even though SPY was trading nearly $10 higher than that (and posted about in the room over the last week).  A vibration window is confirmed for the week of Dec 10, with more weight assigned to earlier in the week.  And I continue to agree with another post in the room on Dec 4, wherein the BTS believes the bulls or bears will "win" their multi-week to multi-month path very soon. 

In metals, the action continues to fit within BTS expectations, with the expected pullback into 114.50-115 and then a recovery higher.  The BTS still leans towards a break higher out of this consolidation and a press to 120-123. 

Here are two paths to consider: (1) [BP=68%] SPDR Gold Shares (GLD) develops a false break low from the 113s and then higher into year end, and (2) [BP=32%] GLD's high on Oct 27 generally holds, a false break higher confirms, and then a bearish push below 113 begins. 

What next?  GLD continues to press higher from the lows identified last week.  The "vibration window of significance" for this week has weakened a bit and now appears only as a bump in the road -- the interpretation is bullish at the moment. 

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