20 October 2018 Volume 11, Issue 43. Summary for week of 22 October 2018

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1 20 October 2018 Volume 11, Issue 43 Summary for week of 22 October 2018 Stocks with bearish bias this week; likely retest of lows Dollar leans bullish this week, especially later in the week Crude oil vulnerable to more declines this week although late week is bullish Gold may be choppy but with upside likely this week or next US Stocks Stocks ended a choppy week of trading largely unchanged as China s weaker than expected GDP data undermined the rebound. The Dow posted a 100-point gain, however, to 25,444 while the S&P 500 was exactly unchanged from the previous Friday close at The Nasdaq and the Russell were somewhat bearish and ended the week modestly lower. This fairly neutral outcome was more or less in line with expectations as I thought the SPX would likely remain in its recent lower trading range below The week unfolded as expected with an early week bounce (on Tuesday) above 2800 followed by a pullback to the 200 DMA. Stocks appear to be trying to find a bottom here as investors attempt to weigh the twin impacts of rising treasury yields and tariffs on corporate profits. After yields dipped in the preceding week, rates pushed back above 3.2% last week as markets try to come to terms with a potential new normal. Tariffs are likely to cut into the corporate earnings as sales decline and prices rise a possible double whammy. While rising interest rates are part and parcel of a growing economy, it is not clear that corporate earnings are destined to rise

2 further to offset the impact of more expensive borrowing costs. Another headwind for stocks here are the midterm elections which are likely to favor the Democrats. Stocks may be more likely to rise after November 6 th regardless of the outcome as the uncertainty would be finally out of the way. The planetary outlook suggests that a retest of 2710 is possible by the end of October. Bearish Saturn could be activated by its alignments with Venus and the Sun this week upcoming which is likely to correlate with some downside. I m uncertain if this will be enough to push the SPX back down to 2710 but it s certainly possible. Looking further ahead, there is likely going to be another more negative period in the second half of November when Jupiter aligns with the Lunar Nodes. Here again, I am uncertain if this can produce a lower low or a higher low but since December and January look more bullish generally, any late November pullback could be an opportunity for bulls to go long. The technical picture seems to be setting up for a rebound. Everybody is watching to see if the 200 DMA at 2768 will hold as support in the coming days. Bulls will likely accept a retest of the previous low near 2700 in any event, although the rebound could conceivably get underway without a hard retest of In other words, many bullish investors are buying now in anticipation of the rebound that will inevitably come, whether it happens now or in a few weeks. But there is a chance that a move below 2700 could spark another fast move lower, possibly down to Resistance is still around 2830 which is the 50% retracement level from the high. Another level of resistance may be near the 50 DMA at If the rebound continues in the coming days, we could see 2870 only to have the SPX come under pressure again and then retest the lows at The speed of the recent decline means that a V-shaped bottom is unlikely and that there should be some kind of retest whether it takes place next week or next month. The weekly Dow chart shows how weak last week s bounce was off support at the 50 WMA. The long upper wick suggests that another test of the recent low is more likely than not. A similar weak rebound after a big red weekly candle occurred in early April and was followed by a retest of the initial low in March. The Nasdaq 100 is also testing support at the 200 DMA. The chart may be making a higher low here although a retest of 6900 is still quite possible. The Russell 2000 is the weakest of the lot as it is retesting its low now. While it presents an interesting long opportunity, one would suspect a lot of stop losses underneath the Oct 12 low.

3 This week looks mixed with some bearish potential. The early week leans bearish with Monday s Moon-Saturn alignment and Tuesday s Venus-Saturn alignment. Neither of these is especially negative but they both carry a moderate amount of bearishness. Wednesday s Full Moon looks unstable given the conjunction with Uranus. Thursday s Sun-Mars alignment also offers bears an advantage. Friday s Moon-Mercury-Jupiter alignment hints at a positive ending for the week. While the particular aspects don t look strongly negative individually, there are a series of tense patterns through the week that make a retest of 2710 quite possible. That would be the most likely scenario. I would also not rule out a breakdown of 2710 either although it may be brief. If I am mistaken, then we may see more choppy trading which eventually ends on a more positive note. I do think Friday has a good chance for a gain in that respect. Next week (Oct 29-Nov 2) looks more bullish on the Venus-Uranus alignment early in the week. There is some downside risk later in the week but I would lean bullish overall here. The following week (Nov 5-9) could be focused on the midterm elections on Tuesday the 6 th. The early part of the week could be somewhat positive although the days following the election look more bearish. I would expect any rebound in early November to gradually lose steam and fail. This could begin right after the election or perhaps in the following week (Nov 12-16). Mercury turns retrograde while square Neptune on the 16 th so that should correlate with some selling. It is possible we could see a key retest of the October low sometime in the second half of November. It could also be a lower low but it s hard to say. A rebound should begin by December and continue into January. This rebound should be fairly strong although I am uncertain if it will produce a higher high. A significant pullback should begin in the second half of January and continue into February. If early January has only seen a lower high, then this could be bad news for the bull market as a pullback from a lower high would do some key technical damage. I think the market should recover by March, however, and we could see another rally attempt into April and May. But my general view is that a larger decline is still more likely to occur sometime in the summer, perhaps starting in May or June and lasting two months at least. This looks like the beginning of a bear market and so 2019 looks bearish overall. Technical Trends Astrological Indicators Target Range

4 Short term trend is DOWN bearish (confirming) SPX (1 week ending Oct 26) Medium term trend is DOWN bullish (disconfirming) SPX (1 month ending Nov 26) Long term trend is UP bearish (disconfirming) SPX (1 year ending Oct 2019) Indian Stocks Stocks slumped again last week on the underperforming real estate sector, weak data out of China and EU anxiety over the Italian budget. The Sensex lost more than 1% on the week to 34,315 while the Nifty finished at 10,303. While I thought the week might be more bullish overall, the week unfolded largely as expected. The early week was bullish but gains reversed on Wednesday just as the Moon conjoined bearish Mars and Ketu. Friday s decline was also in keeping with expectations given the Mercury-Mars square alignment. The fundamental outlook is still very uncertain. Interest rates are set to rise further both globally and domestically so this may put pressure on equities from various corners. Fresh tensions in the Middle East could add to current problems if oil prices rise again as the RBI would have no choice but to hike rates further. And that now China has reported weaker than expected growth data, the floor under emerging markets just got that much shakier. India is still in the best possible position but headwinds abound while catalysts for higher highs seem scarce.

5 The astrological picture remains mixed at best. Bears have benefited from the Saturn-Ketu-Uranus alignment but that is largely over now. We are likely to see some further downside probing from this week s Sun-Venus-Saturn alignment but it isn t clear if there will be a major second leg lower. Marginally lower lows are quite possible but whether the Nifty breaks 10,000 is less clear by the astrological indications. Another bounce is likely in early November but it could be fairly short-lived since the Jupiter-Rahu alignment seems likely to correlate with some downside by the middle of November at the latest. In other words, a retest of the lows looks quite likely here, whether it happens this week upcoming or indeed in late November. Lower lows are still very possible so bulls should not get overly adventurous. The technical outlook looks bearish. Wednesday s red candle was a reversal signal as bulls bailed out just before the test of resistance at the 20 DMA and more importantly at the 200 DMA at 10,778. This not only strongly suggests a retest of 10,138, but lower lows look more likely than not. While I am generally bearish over the next few weeks, the technical bullish case is not without merit. There is a positive divergence setting up on the RSI in the event of a retest of 10,138 and even if we see a marginally lower low. There is a reasonable case for bulls to buy here. And yet if support at 10,200 is broken, then the measured move downside target is That may prove to be a safer entry point for bulls seeking to go long. If we get a bounce this week and the Nifty stays above 10,200, then 10,700 would again be resistance. I would expect this level to be broken to the upside in that double bottom scenario. A move above the 200 DMA would have an upside target of 11,200. The weekly Sensex chart is looking more ripe for a rebound here as stochastics are clearly oversold below the 20 line. A bullish crossover in the coming weeks would indicate a decent buying opportunity for the medium term. And yet bulls should be cautious here, too, since any move lower could invite a flush down to the 200 WMA at 29,735. This is by no means certain, but the risk is real. Meanwhile, Infosys put in a higher low last week after failing to move above the convergence of the 20 and 50 DMA. A close above 720 would be bullish and would confirm the current pullback as a mere bull flag pattern. However, a move below 660 would be quite bearish and could signal a much longer period of consolidation. HDFC Bank appeared to be finding a bottom last week near the 200 DMA. After the retest of 1925, there is some reason to expect further upside in the near term. However, it needs to climb above the 50 DMA soon or else bulls may get discouraged.

6 This week does not offer strong evidence for a bounce. The early week is suspect as Monday s Moon-Rahu aspect looks difficult. Tuesday may be less bearish even if the bullish patterns are not clear. Wednesday s Full Moon looks especially unstable as it conjoins Uranus just as the Sun aligns with Rahu. I would think at least one significant down day is likely from this pattern on Wednesday or Thursday. Friday looks more bullish as the Moon aligns with Mercury and Jupiter. The afternoon is more promising in that respect. The downside risk here would seem to outweigh the positive aspects, although I would be surprised if there was a sharp decline this week. One possible scenario would be a retest of 10,200 on Monday followed by a bounce on Tuesday to a lower high (10,300?) and then lower lows to 10,100 by Wednesday or Thursday. There is a bearish bias overall here, although Friday s bounce could be fairly strong. Where the Nifty finishes up is hard to say, although I suspect it will be significantly lower than resistance at 10,700. Next week (Oct 29-Nov 2) looks bullish to start as Monday s Mercury-Jupiter conjunction looks positive. Tuesday s Venus- Uranus opposition also leans bullish so there is a decent basis for some upside here. There is some risk of midweek downside but overall the week looks bullish. The following week (Nov 5-9) could start out bullish but the late week Jupiter-Rahu alignment may be more negative. My general view is that we will see the rebound run out of steam in the first two weeks of November. Mercury s retrograde station on 16 th November is likely to coincide with some declines and these could last for a week or two. Lower lows are therefore possible in late November so bulls should be careful. We should see a rebound in December which extends into January. However, at this point I would not expect higher highs in Q February looks more bearish so this could see a technically damaging pullback from a lower high. After a strong rebound in March and April, a deeper pullback is more likely in Q2 and leading into Q3. Overall, 2019 looks fairly bearish overall. Technical Trends Astrological Indicators Target Range

7 Short term trend is DOWN bearish (confirming) 10,100-10,500 (1 week ending 26 Oct) Medium term trend is DOWN bearish (confirming) 10,000-10,700 (1 month ending 26 Nov) Long term trend is UP bearish (disconfirming) 9,000-10,500 (1 year ending Oct 2019) Currencies The Dollar pushed higher after Fed minutes showed a clear preference for higher rates in The USDX finished the week at while the Euro was weighed down by the implications of the Italian budget and settled at I thought the Dollar might have been more neutral here although I had expected some upside next week in any event. The Dollar is back up at resistance at 95.5 so it remains to be seen if there are enough reasons to buy it. The Euro is suddenly less attractive as the Italy is doing all it can to upset the apple cart. The likelihood of the Democrats taking the House on Nov 6 th has been largely discounted by the market now so perhaps there is a greater reason to buy greenbacks. And yet the chart still looks vulnerable to declines as long as resistance isn t broken at We can see a sort of protracted head and shoulders top pattern here which has a downside target of 90 if the neckline at 93.5 is violated. I m still not convinced this is the most likely outcome here although Dollar bulls should know that Special Counsel Robert Mueller is expected to release his findings after the midterm elections, most likely in November. If they are damning to the Trump White House, we should look for the Democrats to begin impeachment proceedings soon thereafter. This would cause a sharp sell-off in the Dollar.

8 This week leans bullish for the Dollar although I would not necessarily expect a breakout above resistance here. There is some downside risk in the first half of the week so bulls should be cautious. While the alignments look unhelpful, I would not say they look strongly bearish. That could mean that support at 94.5 could hold this week. The late week looks more positive as Mercury conjoins Jupiter. More upside is likely next week (Oct 29-Nov 2), especially in the early going. However, I would think the Dollar is more likely to weaken by the end of the week. Further downside also looks likely following the election on Nov 6. The downside risk looks significant and seems likely to test support at A breakdown is very possible so we cannot rule out a test of the 200 DMA at A rebound is likely to begin sometime in December and extend into early A move to 97 looks likely in any event, and higher highs are also possible. The Dollar should remain fairly bullish through the first half of 2019 at least. The Dollar may become more prone to declines in the second half of 2019 with further downside likely in Technical Trends (Dollar) Astrological Indicators Target Range Short term trend is UP bullish (confirming) (1 week ending Oct 26) Medium term trend is UP bearish (disconfirming) (1 month ending Nov 26) Long term trend is DOWN bullish (disconfirming) (1 year ending Oct 2019)

9 Crude oil Crude oil slipped last week on significant growth of US stockpiles. WTI fell 3% on the week to just under $70 while Brent declined more modestly to $80. This bearish outcome was in keeping with expectations as the Moon-Mars conjunction on Wednesday and Thursday did coincide with the sell-off. The early week also saw some upside as forecast although it did not alter the overall bearish technical condition of the market. Crude may be approaching a bottom here as Friday saw buyers come in near trend line support at $68. While we could see further downside in the near term, it seems more likely that the 200 DMA at $67 will serve as support. Bulls are therefore taking positions here irrespective of any Iran uncertainty or fallout from the Saudi situation for that matter. Rising trend line resistance is now near $80 and may be a conservative target for bulls in the coming weeks. The weekly Brent chart reflects the long term bull market as each move higher has been followed by a short period of consolidation which finds support at previous resistance. Currently, this pullback is finding support at $80 which is indeed previous resistance. A weekly close below this level say to $75 might complicate the long term bullish picture and could signal the beginning of a deeper pullback. This week looks mixed at best with a likelihood of more downside at some point. The early week leans somewhat bearish on Monday s Moon-Saturn square. Tuesday s Moon-Pluto square also could bring some selling although it is not a clear-cut influence. Wednesday s Full Moon could produce a significant move although the direction isn t clear. The end of the week looks more bullish but whether we see some upside beforehand remains to be seen. I would lean bearish just in case. Next week (Oct 29-Nov 2) looks somewhat more positive as Mercury conjoins Jupiter. If we have seen weakness in the preceding week, then a bounce is more likely here. But the rest of November may be more vulnerable to declines. The Mercury retrograde station on Nov 16 in particular should bear close watching. We could see a retest of the 200 DMA by that time, and a breakdown is possible. Crude should recover sometime in December and should undergo a significant rally into January. Higher highs are possible in Q A significant correction is likely in the late spring and early summer, however.

10 Technical Trends Astrological Indicators Target Range (WTI) Short term trend is DOWN bearish (confirming) $67-72 (1 week ending 26 Oct) Medium term trend is UP bearish (disconfirming) $60-70 (1 month ending 26 Nov) Long term trend is UP bullish (confirming) $70-85 (1 year ending Oct 2019) Gold Gold inched higher last week as uncertainty in the Eurozone may have boosted its safe haven appeal. Gold added just $6 and finished at While this bullish outcome was in keeping with expectations, I thought gold could have pushed higher towards However, resistance proved to be 1240 as price reversed at that level several times last week. The chart is still bullish as last week s sideways action can be seen as a bull flag and hence normal consolidation after a breakout higher. But bulls will have to defend 1220 or else risk the end of this rally. If 1220 should fail as support then a return to 1200 or below is more likely. Nonetheless, the technical picture looks bullish enough that it should bring buyers here. If and when resistance at 1240 is broken, then we could see a run up to 1260 fairly quickly and even to the 200 DMA at While a move up to the 200 DMA would be a significant technical development, the bear market would still be intact. For a sustainable move higher, gold has to clear Until then, rallies should be treated with some skepticism. It may require a major surge in bond yields for gold to move

11 significantly higher. While they have moved up above 3%, inflation expectations would have to rise quite a bit further to make gold more attractive as an inflation hedge. This week looks choppy and hard to call. Monday s Moon-Saturn square leans bearish although not strongly so. Tuesday is a toss-up as Venus moves into alignment with Saturn. This actually lasts for two or three days and carries some downside risk. However, Wednesday s Full Moon is a wild card which could see a big move in either direction. Bulls may have hope here for a breakout higher. And yet, I would not say that such a move has a high probability. But the planets seem to be preparing for a significant move. The late week looks more clearly bullish as Mercury aligns with Jupiter. I am uncertain where gold is likely to finish up here. Next week (Oct 29-Nov 2) looks more bullish on the Venus-Moon-Uranus alignment. The first half of the week looks more bullish in that respect. The following week (Nov 5-9) still looks bullish albeit less so than the preceding week. It is possible we could see gold remain fairly bullish until the middle of November and the end of the Venus retrograde cycle on the 16 th. I m not sure exactly when the rally will end, but I would suggest that bulls become more cautious after this date. Late November looks more bearish and may bring about a reversal lower. December may see more downside. This looks like a significant pullback that could retest the recent lows of Gold should rebound by Q and it may enjoy some significant upside although I would be reluctant to forecast higher highs. Another significant correction is likely in Q2 and Q3 although gold may be able to build a sustainable rally late in 2019 and in Technical Trends Astrological Indicators Target Range Short term trend is UP bullish (confirming) (1 week ending Oct 26) Medium term trend is DOWN bullish (disconfirming) (1 month ending Nov 26) Long term trend is DOWN bearish (confirming) (1 year ending Oct 2019)

12 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