LOW PROBABILITY IS FAR FROM ZERO PROBABILITY
When using probability models to assess any situation, humans tend to equate very low probability outcomes with something that cannot or will not happen (see 2016 U.S. presidential election). Therefore, it is important to understand a low probability outcome is radically different from a zero probability outcome, and thus, the need for maximum flexibility going forward.
SPEAKS TO NEXT FEW MONTHS RATHER THAN NEXT FEW DAYS/WEEKS
Q: With a TS score of 7, is it possible the market continues to rally sharply and confidently moves above the 200-day moving average?
A: Yes, anything is possible in the markets and we are prepared for all outcomes from wildly bullish to wildly bearish. The TS score speaks to risk-vs.-reward. A recent similar breadth thrusts piece covered a V-bottom that occurred in 1971. In the 1971 case, the S&P blew through the 200-day and never looked back. The TS score after clearing the 200-day was 38, which is still considerably higher than the score of 7 we are seeing today. The moral of the 1971 story is we should be open to and prepared for bullish outcomes near the 200-day in 2019.