13 October 2018 Volume 11, Issue 42. Summary for week of 15 October 2018

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1 13 October 2018 Volume 11, Issue 42 Summary for week of 15 October 2018 Stocks could rebound further, although second half of week looks bearish Dollar vulnerable to more downside Crude oil could see more downside, esp. in second half Gold likely extending gains this week US Stocks What a difference a week makes. Stocks sold off sharply last week on worries about rising interest rates and the vulnerability of the tech sector. Despite Friday s bounce, the Dow was down 4% on the week while the S&P 500 finished at While I was bearish, I didn t expect we would see selling of this magnitude. And yet the week did play out largely as expected as the early week saw a weak bounce with the heavy selling taking place on Wednesday and Thursday as the Mars-Venus square was exact and the Mercury-Saturn-Lunar Node alignment with closest. Friday s gain also roughly correlated with a better planetary set up after Jupiter entered Scorpio on Thursday. Suddenly, this Trump rally is in big trouble. Investors are now taking a more cautious view of growth prospects going forward given significantly higher interest rates. The benchmark 10-year actually fell last week as money moved out of riskier equities and into the relative safety of bonds. With the trade issue not going away anytime soon and rates on the rise, there is a danger that growth is more likely to fall below 4% very soon. More analysts are now openly discussing the possibility of a

2 recession in 2019 or November s midterm elections are an additional source of uncertainty now as polls show the Democrats look more likely to take control of the House. This will likely neutralize Trump s pro-market economic policies and we could also see impeachment proceedings begin against him. The planetary alignments for October still suggest that caution is warranted. With the Mars-Venus square now out of the way, it would be tempting to think the market will turn bullish again quickly. While a bounce is likely this week upcoming, I m less certain we will see a bullish V-shaped bottom where stocks quickly climb back to their previous levels in the coming weeks. Late October is still looking bearish and could well bring a retest of the low at 2700 and indeed a second leg lower is still possible. The underlying bearish influence of the Saturn-Lunar Node alignment is still capable of coinciding with more selling in the next two or three weeks. Because both Saturn and the Nodes move so slowly, it was more difficult to time their effects. That was one reason why I thought September would bring more downside. And yet, the Saturn-Node alignment is still within effective range here in October and is one reason why we got a breakdown of support at But the question is whether its influence will last long enough to produce another leg lower. Unfortunately, I don t have a clear answer to that question. Time would appear to be on the side of the bulls as the Saturn-Lunar Node alignment is separating now. If we get a bounce this week, then any subsequent declines in late October, for example, may not necessarily produce lower lows. And the question is made more difficult because of the current technical situation. The technicals are suddenly quite bearish and yet the indexes are close to key support. This argues for a rebound very soon, although lower lows could still be possible if the rebound eventually fails. The SPX broke its 200 DMA at 2766 on Thursday and only barely recovered it by Friday s close. This is always an important level and even more so since it matches the rising trend line of the Trump rally since Nov Brief piercing lows of the 200 DMA are possible as long as price recaptures it quickly. Therefore, bulls are expecting we could see a V-shaped rebound and a move above 2800 soon. This view is plausible enough, although the speed and depth of last week s sell-off suggests that a retest of 2710 at very least may be necessary before the rally resumes. And with every retest of support there is the possibility of breakdown.

3 The next level of support below 2710 is likely near 2600 although we could also see a quick retest the January low at 2532 in the event of that second leg lower. The planetary set up doesn t look negative enough to make this more bearish view probable although I cannot rule it out either, especially if the next leg down occurs soon, i.e. this week. In terms of resistance, we should watch carefully if the SPX can reclaim 2800 and then was the intraday high on Wednesday before the bottom fell out so we could see this oversold bounce run out of gas there. I suspect bears will be waiting to short at that level, hoping at least for a retest of 2710, if not a second leg lower. If the bounce is stronger and more durable, then the 50% retracement level of 2830 could be more important. This may be the dividing line between a bullish scenario that sees the SPX trade in its upper range and one that is more bearish where there is still some doubt if the bottom is in yet. The weekly Dow chart also shows how last week closed at key support at the 50 WMA. If the Dow goes below 25,000 again, then it may quickly fall to that Q1 horizontal support level of 23,500. NDX enjoyed a stronger bounce on Friday and looks to be in a better position to rebound going forward. By contrast, the small cap Russell 2000 looks quite a bit weaker and may be more vulnerable to further downside. The planets this week suggests a bounce is likely but it is unclear if stocks will finish the week higher. Monday s Mercury-Venus conjunction looks bullish and argues for a continuation of Friday s recovery. If we happen to see some selling instead, I would think the lows of 2710 are unlikely to be broken. Tuesday s Moon-Sun-Jupiter alignment also looks bullish and offers a second chance for bulls. If we get two up days here then 2800 is looking fairly likely and I would not rule out 2830 (i.e. 50% retracement) by Wednesday. But downside risk rises on Wednesday and then further on Thursday as Mercury squares Mars. Friday also leans bearish as Mercury and Mars align with Neptune. Overall, the planets may argue for a sell the bounce approach given the likelihood of some selling in the second half of the week. Bulls could also be rewarded in the first half of the week but gains are less likely to hold. It is possible we could finish in the bottom end of the range of last week s candle between 2710 and At the same time, I would not be surprised to see lower lows, especially if the early week turns out to be more bearish than I am expecting. The problem with lower lows is that they would complicate the technical picture and argue for 2600 or below. The planets may be somewhat bearish here, but they don t quite look that bearish. But we will see.

4 Next week (Oct 22-26) could see some significant moves in both directions. If there is going to be a breakdown of 2710, then this seems like the more likely time. The early week looks more bearish in this respect as the Moon squares Saturn on Monday. Tuesday s Venus-Saturn alignment also leans bearish. And yet there is considerable uncertainty about the rest of the week given the Sun-Moon-Uranus alignment. A strong move higher is also quite possible on this alignment although I am reluctant to predict it given the Full Moon this week. A more bullish scenario would be a retest of support is possible early in the week with a sharp rebound in the second half of the week. The following week (Oct 29-Nov 2) looks more clearly bullish as Mercury conjoins Jupiter and Venus opposes Uranus. This may be the safer week for bulls to go long, even if the rebound is already underway. If October turns out to be bearish, then I do think that November should be more positive overall, albeit with some significant downside in the second half of the month. It is possible we could see lower lows ( ?) in the second half of November, although bears should not count on that. Nonetheless, the basic set up here is for a strong rebound to begin sometime in November which then gains traction in December and January. While I would not rule out higher highs in Q1, it seems like a stretch, especially since a pullback is likely in late January and February. Q2 and Q3 are likely to produce a significant correction which could exceed 20% and thus formally begin a bear market as a whole looks quite bearish although a recovery is likely in Q4. Technical Trends Astrological Indicators Target Range Short term trend is DOWN bearish (confirming) SPX (1 week ending Oct 19) Medium term trend is DOWN bullish (disconfirming) SPX (1 month ending Nov 19) Long term trend is UP bearish (disconfirming) SPX (1 year ending Oct 2019)

5 Indian Stocks Stocks enjoyed an oversold bounce last week as oil prices fell, thereby reducing inflation concerns. The Sensex gained more than 1% on the week to 34,733 while the Nifty finished at 10,472. This bullish outcome was not unexpected, although I had been uncertain given the mix of planetary influences in play. The gains were focused on Wednesday and Friday as Jupiter entered Scorpio, while Thursday s low coincided closely with the exact Mars-Venus square aspect. Last week s gain offered hope that stocks had bottomed as interest rate worries eased. The decline in the oil price was most welcome in this respect but the global bond market also saw yields come down as nervous investors sought out a safer haven. 3 rd quarter earnings could help rekindle enthusiasm for stocks in the weeks ahead as markets have now largely discounted the negative effects of Trump s trade disruption. Inflation is still a source of concern, especially if the data begins to tick higher in the US. With the Fed essentially guaranteeing another rate hike in December, the last thing equity markets need are sharply rising yields in US-denominated debt. The upcoming US midterm elections in November are another source of uncertainty as the Republicans are now expected to lose control of the House of Representatives. This could stymie Trump s policies which actually could prove positive for global trade. But the possibility of impeachment would loom large if the Democrats won the House and markets are likely to respond negatively to that uncertainty, at least initially. The planetary outlook for the rest of October is mixed. The lingering bearish effects of the Saturn-Ketu- Uranus alignment could be felt further, although I tend to think we have seen the worst of it already. Therefore, I don t think there is a strong likelihood of another major leg lower in the near term. A rebound is therefore more likely, although I suspect it will not be very strong. October may well be range bound with some upside bias that continues into early November. I do think another move lower is quite likely although my expectation now is that it won t occur until the second half of November and December. Bulls should therefore be cautious with any long positions taken in October. Some gains are likely but rallies are more likely going to be sold and may not last. It is too early to say if the Nov-Dec

6 pullback produces a lower low. It s quite possible, although it will depend on how strong the preceding rebound is. The technical outlook is bearish. Last week s rebound was welcome although not really much more than an oversold bounce. The Nifty was sitting on key long term trend line support dating back to the March 2016 low so some buying was likely in any event. But it is critically important that the rebound continue as any lower low below 10,200 could spark a further move lower. Thursday s retest of the low at 10,200 was technically constructive, however, as it set the stage for Friday s strong bounce. If there is follow through on the upside this week, then there is hope for at least a longer rebound. A move above 10,500 would be the first step in that modestly bullish scenario. Bulls may be looking for the bounce to last at least until a retest of the 200 DMA and a gap fill to 10,900. That may not significantly improve the technical condition of the market as it may well signal an interim top that is sold again by nervous bulls. The rally will only be on more solid footing if there is a daily close above 11,000. Indeed, the weekly Sensex chart offers bulls more tangible evidence for a rebound after last week s candle produced a long lower wick. This is a classic hammer candle and indicator of a trend reversal. Stochastics is also oversold now at 18 so there is additional reason to think that we could be close to a bottom at least. A move above the 20 line and a bullish crossover would provide more evidence that the medium term outlook had become bullish. Meanwhile, Infosys had a bad week as it broke support at the 50 DMA at 700. A test of the 200 DMA now looks more likely than a quick move back to its previous range of HDFC Bank found support last week at the 20 and 200 DMA. The double bottom pattern looks bullish, especially on a daily close above the 50 DMA at The chart would become bearish with a lower low below This week could see the rebound go further. The early week leans bullish as Mercury conjoins Venus on Monday. The Moon- Saturn conjunction in the morning could introduce some weakness, however. Tuesday s Sun-Jupiter alignment also offers the bulls some hope that the rebound can continue. If Monday turns out to be bearish,

7 then Tuesday is perhaps a better bet for gains. Wednesday looks uncertain as the Moon conjoins Ketu and Mars. If the early week has seen a bounce, then a pullback is more likely on Wednesday. Thursday s holiday closing may reduce exposure to the bearish Mercury-Mars square aspect but Friday is still likely to see some selling because of it. Overall, I would lean bullish this week, especially if Monday has been bullish. If it is not bullish, then we could see more downside and a possible retest of 10,200. However, I think it is possible we could see a retest of the 200 DMA at 10,779. Next week (Oct 22-26) looks less positive as Venus aligns with at midweek. Even the early week looks iffy as the Moon aligns with Rahu. If the preceding week has seen a bounce, there is an elevated risk of some selling during the week. If we have seen some declines in the first half, then there is a chance for a late week bounce, especially on Friday. The following week (Oct 29-Nov 2) looks more bullish as Mercury conjoins Jupiter and Venus opposes Uranus. This looks like a strong rebound. Early November should see the upside momentum continue although I would be skeptical about the prospects for a major new rally or higher high above 11,700. The second half of November looks bearish again as Venus ends its retrograde cycle and aligns with Mars. It is unclear if this will produce lower lows although at this point, I don t think that is likely. Another rebound should begin in December but Q looks quite mixed as February looks very bearish. A stronger rally is likely in Q2 but Q3 should be quite bearish and may produce a lower low. Overall, 2019 may see a bear market take hold. Technical Trends Astrological Indicators Target Range Short term trend is DOWN bullish (disconfirming) 10,100-10,900 (1 week ending 19 Oct) Medium term trend is DOWN bullish (disconfirming) 10,500-11,300 (1 month ending 19 Nov) Long term trend is UP bearish (disconfirming) 9,000-10,500 (1 year ending Oct 2019)

8 Currencies The Dollar pulled back last week as inflation data turned out to be weaker than expected. The USDX closed just under 95. This bearish outcome was not unexpected as I thought we could see some weakness during the middle of the week on the Mars-Venus aspect. The Dollar is continuing to trade sideways here between 93 and 96 as it awaits its next catalyst. With reduced inflation concerns, there is less reason to get bullish on the Dollar, even if the Fed hike in December is a done deal. And if the polls are correct and Democrats take the House of Representatives in the November midterm elections, there may be less reason to hold the Dollar. Democrats are less likely to sign off on any further tax cuts and may well begin impeachment proceedings against President Trump. The Eurozone has its own share of challenges as the latest Italian budget may force a showdown with the EU. The next few weeks therefore could bring new uncertainties on both sides on the Atlantic. For now, the emerging markets sell-off seems under control as the Dollar tacks towards its middle ground. The next Fed hike won t be until December so we could see a period of range bound trading here. This week could see more range bound trading although with a greater downside risk. The early week Mercury-Venus conjunction could bring some upside to the Dollar but the late week looks more bearish. My general expectation is that the Dollar could test support at 93.5 either this week or next week. The last week of October could see a bounce as Mercury conjoins Jupiter on Oct 29 but I would be skeptical if this bounce breaks above resistance at 96. Early November looks more bearish, possibly as a result of election uncertainty from the midterms on the 6 th. There is a greater risk of a technical breakdown below support at 93 and the 200 DMA in November. Another rally should take hold sometime in December and extend into January. I would not necessarily expect a higher high above 97 during Q1, however. A stronger rally is more likely around mid-2019 which could bring higher highs. The Dollar will eventually weaken later in 2019 and this decline should extend into 2020 and beyond.

9 Technical Trends (Dollar) Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) (1 week ending Oct 19) Medium term trend is UP bearish (disconfirming) (1 month ending Nov 19) Long term trend is DOWN bullish (disconfirming) (1 year ending Oct 2019) Crude oil Crude oil sold off sharply last week as inventories grew and a lack of fresh news about the proposed Iran sanctions. WTI fell 4% to just over $71 while Brent finished the week above $80. This bearish outcome was not unexpected as I thought we could begin to see some weakness during October. Tuesday s gain was in line with expectations as the New Moon looked somewhat favourable while the late week selling also coincided with the bearish alignment of Mars and Venus. While the rally remains intact, the current pullback may well continue down to the 200 DMA at $ The daily chart will only turn bearish if there is a close below this line, say, below $63. If we see a bounce this week, immediate resistance is the 20 DMA and $73. A failure to break above that level would likely mean more downside ahead. The weekly Brent chart is sitting on decent support at $80. Further downside from here would suggest a testing of the middle Bollinger band at $ If the retracement deepens, it seems likely that buyers will again enter in force at $70, however. The chart only turns bearish if Brent falls below $70. Until that happens, the three-year rally is likely to continue and to reward dip buyers. This week is likely to see more downside. I would think the Moon-Mars conjunction on Wednesday and Thursday might be a more likely time for declines. The early week therefore could see a rebound although it may be regarded more skeptically given the more difficult patterns in the second half of the

10 week. If we get some early week gains, they may test resistance at the 20 DMA but then reverse lower. Therefore, there is a risk that WTI could fall below $70 this week and Brent could fall below $80. Next week (Oct 22-26) also has some downside risk, especially in the first half of the week. This would appear to give bears a second chance to test or break support. The following week (Oct 29-Nov 2) looks more positive as Mercury conjoins Jupiter early in the week. November looks mixed at best, especially in the first half of the month. I would not expect a significant new low but rather another test of support, perhaps near the 200 DMA. Another move higher is likely to begin in late November and continue into December. This rally should at least test resistance again and may well continue the pattern of slightly higher highs as we head into January. Q looks mixed with a bullish bias. Bulls should become more cautious in Q2 and Q3, however, as the Saturn-Pluto conjunction is likely to coincide with a major correction. Technical Trends Astrological Indicators Target Range (WTI) Short term trend is DOWN bearish (confirming) $67-72 (1 week ending 19 Oct) Medium term trend is UP bearish (disconfirming) $60-70 (1 month ending 19 Nov) Long term trend is UP bullish (confirming) $70-85 (1 year ending Oct 2019)

11 Gold Gold finally broke above technical resistance on Thursday as the rout in equities pushed investors towards safe havens. Gold added more than 1% on the week to This bullish outcome was in keeping with expectations as I thought the entry of Jupiter into Scorpio later in the week might fuel some buying. The breakout higher actually came a day earlier than expected on Thursday rather than Friday s Moon-Jupiter conjunction. Now that gold has broken above resistance, we will have to see how much strength the bulls really have. A move back below 1200 would be bearish as it would signal that the breakout if false, and even a move back below 1210 might actually cause some dismay and may hasten a retest of But more likely than not, Friday s back test of 1220 could be the catalyst for the rally gain strength from here with the measured move target of 1260 the next possible resistance level. Above that, the 200 DMA at 1280 could loom large as it roughly matches previous key horizontal support which is now resistance. Even if we get a sustained move higher, it is important to remember this may not be the beginnings of a new bull market. Gold has a long way to go before it can recapture even its previous trading range of , let alone move above it. This week looks bullish to start at least as Mercury conjoins Venus on Monday and then the Sun aligns with Jupiter on Tuesday. There is some risk of a pullback on Wednesday or Thursday but Friday looks bullish again on the Moon-Sun alignment. Overall, I think the chances are good for some follow through to the upside, perhaps to Next week (Oct 22-26) looks more mixed, although the early week could see further gains. The problem is that the second half of the week has Venus aligned with Saturn which can be bearish. It is possible that gold will continue to rally despite that aspect but bulls should be more careful here. The following week should bring further gains as Mercury conjoins Jupiter on Oct 29. Early November is harder to call and may see choppier trading although I would lean towards a bullish bias. It is difficult

12 to say how high gold could go, although a retest of the 200 DMA does not seem unreasonable. But the second half of November looks more negative as Mars comes under the influence of Saturn. December is likely to see more downside and could undo a lot of the gains made since October. Another move higher is likely in January and we could see gold moving modestly higher in Q A significant correction is still quite likely in Q2 and Q3, however. Gold may only undertake a sustainable rally starting in the second half of Technical Trends Astrological Indicators Target Range Short term trend is UP bullish (confirming) (1 week ending Oct 19) Medium term trend is DOWN bullish (disconfirming) (1 month ending Nov 19) Long term trend is DOWN bearish (confirming) (1 year ending Oct 2019) Disclaimer: For educational purposes only. The MVA Investor Newsletter does not make recommendations for buying or selling any securities. Any losses that may result from trading are therefore the result of your own decisions. Financial astrology is best used in conjunction with other investment approaches. Before investing, please consult with a professional financial advisor Christopher Kevill