Primary Multi-Week View Bearish for U.S. Indices
By
Luke Miller
DAILY THOUGHTS:
How to read this Bayesian Analysis:
- Bayesian Analysis Applied to Avi’s Charts: Using Bayesian methods, considered to be one of the most powerful probability assessment tools in world today, I calculate the probabilities of Avi’s primary and alternate paths for SPX, GDX, USO, and DXY. In general, probabilities between 55-65% are “moderately bullish” and above 65% are “bullish”.
- Pure Bayesian Analysis: Over a decade ago, I developed the Bayesian Timing Signals (BTS) swing trading system to earn positive returns on 70% of its trades. The discussion herein is based on the BTS, wherein real-time tradeable signals can be found as an EWT service.
BAYESIAN ANALYSIS APPLIED TO AVI’S CHARTS (charts are attached):
SPX: Not much to add if the market doesn’t move….The FOMO/Green b count probabilities continue to lead the yellow count. SPX 2815 remains an important line in the sand on a closing basis, of which bulls failed to do so on 3/4. Over 2815 still points to 2840-2860. On the micro level, below 2780 indicates some type of top for now.
GDX: The probability of GDX extending higher in the green count continues to increase; and given the size of the sell off last week, the timing window has compressed. Expect a buyable bottom within 1-3 weeks.
USO: This has become messy at the multi-day to multi-week level and it’s possible the top to the yellow count has already been seen. As such, the multi-week probabilities do not point to a quality entry point, as of yet. In regards to a longer-term multi-month perspective, the yellow count to much lower prices prevails. Again there is the general price range of 11.80-12.20 to keep in mind.
DXY: The blue path higher has a few hurdles to overcome to indicate it on a probability basis; with the higher probability path pointing lower at the moment. In the interim, a corrective path higher can’t be ruled out before lower in a bigger way – of which on 3/1 that shot higher has begun… the probabilities at this time do not support this move being sustainable.
PURE BAYESIAN ANALYSIS of ETFs:
US INDICES
Primary Multi-Week View: BEARISH
Support: SPY 278 and 268
Resistance: SPY 281 and 286
Important Dates: The week of 3/18
Narrative: Getting below SPY 278 on a closing basis is the most important first step to topping and below 273 should see the 260s. On the upside there is 280-282 (which again rejected the bulls) and then above that is 285-287. The 280-282 resistance continues to be tested and the timing window last week did lead to a stall in the advance. Consider these micro paths: (1) [P=62%] A shot back to slightly above 282 can’t be ruled out and a turn back below 280 should be the top with the 260s to follow (on 3/4 this was satisfied), (2) [P=38%] A more direct path to 285-287.
METALS
Primary Multi-Week View: NEUTRAL
Support: GDX 19.50-20.50
Resistance: GDX 22.75
Important Dates: 2/22-3/8
Narrative: The metals have accelerated their timing window with the price action last week and a multi-month tradeable bottom has the potential to form over the next 1-3 weeks with GDX possibly even seeing a 19 handle. Patience is the play, but a high quality risk return is on the horizon.
OIL
Primary Multi-Week View: NEUTRAL
Support: USO 11.60 and 11.45
Resistance: USO 11.90, 12.20, and 12.50
Important Dates: The week of 3/18
Narrative: In general, a multi-month bearish below 10 is still the best bet; however, the path to there is uncertain, as a shot higher to 13 can’t be ruled out. If a quality risk-return set up presents itself, then a real time trade signal will be posted in the BTS room.
DXY
Primary Multi-Week View: BEARISH
Support: UUP 25.60
Resistance: UUP 25.95
Important Dates: 2/22-3/8
Narrative: UUP continues to bounce in the mid to upper 25s and has for months. One more shot higher over the coming week wouldn’t be surprising before a sustained move back down to the low 25s.
UNG: Signal Long. If this BP path proves out, then a shot back above 30-35 is in the cards…. UNG continues to dance around the 25 level – of which a break above 25.50 should see 26.50-27 in short order. Regardless, it does seem a longer-term bottom was put in several weeks ago; so even if a correction is seen the 30s will likely be the target.
XBI: Signal Short. XBI continues to fumble around as either a blow off top or beginning a new uptrend. At the moment, XBI still presents as a blow off, but extremely stretched at this point.
VXXB: Signal Long. VXX’s replacement is VXXB – which triggered long on 1/28 using a hybrid mix of VXX and VXXB data. The furthest this rubberband will stretch is 29.75-30.25 on a closing basis and these levels were seen and a bounce higher occurred. Really need to see a taste of 32 to feel comfortable “a bottom” of sorts is in. Targets still in the 45s on the turn higher.
XLF: Signal Short. A false break high is the only scenario that works at this point. XLF finally is slipping from the 26.50s level… below 26.20 will most likely see 25.75ish on the first step down.
SMH: Signal Short. Getting below the BP cluster of support at 101 helps on the way to a target in the 94-96 range. Above there is as high at 105 – which continues to be the risk discussed for quite some time now… the most important thing from here is the sticking power near 105, of which nothing has changed in days.
TLT: Signal Long. Increased volatility and back to testing the vw support zone… Target is still 123-125. On the support side keep an eye on 119.50ish; of which TLT closed above on 3/4 and is creeping back above.
