5 January 2019 Volume 12, Issue 2

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1 5 January 2019 Volume 12, Issue 2 Summary for week of 7 January 2019 Stocks likely trending higher albeit with some significant downside Dollar mixed with possibility for some upside Crude oil could consolidate this week but some gains also likely Gold mixed this week with rising downside risk US Stocks Stocks extended their bounce last week on a perfect storm of positive news as the PBOC cut rates, Friday s jobs numbers were strong and Fed Chair Powell delivered more dovish comments. The Dow gained 1.6% to 23,433 while the S&P 500 finished at This bullish outcome was in keeping with expectations although the week unfolded somewhat differently than I expected. I thought we would see larger advances on Wed and Thurs but this was not the case as it was Friday s performance which saved the current rebound. So the oversold bounce continues. But for how much longer? I think we could see a bit more upside but I would be careful around this eclipse period (Jan 6-21), especially around the lunar eclipse of the 21 st. It seems that there are basically three possible scenarios here for stocks. The first is a bullish V-shaped bottom in which the bounce will continue with a series of higher lows along the way and eventually push to new all-time highs above 3000 in the coming months. This would likely require a catalyst such as a US- China trade agreement or perhaps further easing from the BOJ or the ECB. Indeed, there is a high-level

2 US-China meeting this week on Monday and Tuesday which could move markets in either direction. The second scenario would see perhaps a bit more upside into this resistance zone of but then fall back to retest the December low of From there the market could then bounce and while higher highs may not be forthcoming, stocks could trade in a range between The third scenario is the most bearish whereby this bounce would falter in the coming days and we get a retest of But instead of rebounding off the double bottom, there is a breakdown to lower lows, such as the 2016 election night low of The astrological indications tend to argue against the bullish first scenario of a V-shaped bottom. Further upside is still likely in the coming days, but the late January and early February period is more likely to see some kind of significant pullback given the Full Moon, lunar eclipse and the Mars-Saturn square alignment. While it is possible this could merely be another higher low (e.g. above Thursday s low of 2450) I tend to think it will be lower than that, and probably below This assumes that the current bounce runs out of gas soon and tops out below But if we get an interim top at the higher end of that resistance zone ( ), then it is possible that any subsequent pullback into February may put in a higher low above This would be more bullish, of course, and would set up another leg higher. The technical outlook is short term bullish. Friday s close above the early week highs suggested the bulls have taken control. Of course, the rally stopped right at the 20 DMA which is a traditional dividing line between bullish and bearish trends. Bulls need a close above this line (2538) to open up the possibility of pushing towards the lower half of the horizontal resistance zone of The 50 DMA at 2645 would be the next line in the sand for bulls to reach before pondering their options. If there is a pullback this week -- and I think there will be last week s low of 2450 has to hold or else we could have a very quick retest of the December low of More immediately, I think is also important support as buyers should come in there in some number. If not, then a revisit of 2450 is more likely. Longer term, the chart looks quite bearish as the 200 DMA is now sloping downwards just like the 20 and 50 DMA. This is a classic indicator for a down trending market. I would think a break below the December low would likely confirm a bear market. The other main indexes are similarly just below their horizontal resistance levels which will make the next move higher that much more telling. Despite Apple s big sell-off, the NDX chart could

3 easily test resistance at the 50 DMA at 6692 before consolidating. The weekly Dow chart printed a long lower wick candle last week and is at least likely to push towards resistance above 24,000. This chart looks more bearish, however, as the 20 and 50 WMA are likely to crossover soon. It may take some time before that key convergence level of 25,000 is broken to the upside. The jitters in the equity markets have pulled bond yields lower in recent days as investors seek safe havens. While Friday s strong jobs report reversed the down trend, there remains lingering belief that the economy will slow in Thus, the 2-10 year yield spread is still less than 20 basis points. Yield inversion will happen fairly soon, and therefore we will see stocks become more vulnerable to another major leg lower later this year. This week is less bullish than last week. The main reason is the Mercury-Mars square which is very likely to produce at least one major down day (>1%). I m not sure when that down day is more likely as the alignment is in place across several days. Monday leans a bit bullish although there are contradictory influences in play. A move in either direction would not surprise me, although I would think the odds slightly favor the bulls. Tuesday looks less bullish as the Mercury-Mars square is closer. Wednesday lacks clarity and therefore the downside risk is elevated at that time. Thursday looks more bullish as the Moon aligns with the ongoing Jupiter-Neptune square. I would think Friday has a slightly bullish probability as well, although perhaps less than Thursday. Overall, I would lean towards another bullish week, although it will likely have some red days along the way. Even if the bears manage two down days, bulls should not give up hope as the end of the week is likely going to be more positive in any event. And if Monday and/or Tuesday turns out to be green, then we could see another solid up week. Next week (Jan 14-18) looks more mixed. The early week Sun-Lunar Node conjunction is likely to correlate with some downside. And even if there are some bullish days around Thursday s Moon-Jupiter-Venus alignment, Friday looks bearish again as the Sun aligns with Saturn. While I would not rule out further upside here, I would tend to think this is more likely to be a week where stocks consolidate under resistance. Bulls should be careful. The following week (Jan 21-25) looks choppy and volatile. The lunar eclipse occurs several hours before Monday s opening and could represent a rise in anxiety. As it happens, the Venus-Jupiter conjunction also occurs Monday and therefore could indicate some upside. There are a high number of alignments in play which could see stocks move in both directions. Nonetheless, I think bears will have the final say, probably by

4 Tuesday-Wednesday when Mercury and then Mars align with Saturn. As I noted earlier, this is likely to mark the start of a pullback which could extend into February and may well see the SPX retest its December lows. Since the pullback looks fairly large (5-10%), whether or not we get a hard retest of 2340 will depend on how high it has reached in January. After the pullback, there is a decent chance that the rebound will resume in February, March and April. The indications are unclear whether this will be a full-fledged rally or just a range-bound trade. The next major corrective phase is likely to begin in late April or May and extend into June at least. After a bounce in June-July, more downside is likely in August and September. If the SPX has managed to stay above 2100 in Q1 and Q2, it is more likely to fall to this key support level by Q3. Lower lows are also not out of the question, but it is hard to call specific levels. The bottom line is a bear market is highly likely in Technical Trends Astrological Indicators Target Range Short term trend is UP bullish (confirming) SPX (1 week ending Jan 11) Medium term trend is DOWN bearish (confirming) SPX (1 month ending Feb 11) Long term trend is UP bearish (disconfirming) SPX (1 year ending Jan 2020)

5 Indian Stocks Stocks fell to start off the New Year as global growth worries remained dragged down sentiment. The Sensex lost about 1% on the week to 35,695 while the Nifty finished at 10,727. This bearish outcome was unexpected as I thought the midweek period would offset any potential negative influences along the way. Monday and Tuesday were modestly bullish but the Nifty failed to recapture the key level of 11,000. The selling started earlier than expected on Wednesday and Friday s bounce was not enough to alter the down trend. It seems the pullback I had been expecting later in January may have already begun. The global market turmoil has seen a move out of risk assets in December and this has hit emerging markets hard. It is possible that we could still see a brief relief rally in the wake of Friday s developments, however. China s rate cut could provide a lift and the dovish statement of the Fed s Jay Powell may also serve to allay fears of further rate hikes in More optimism is possible this week as the US and China will hold high level trade talks on Monday and Tuesday. Of course, if there are no clear signs of progress, markets will likely sell off once again. The astrological picture would appear to favour the bears in the coming weeks. This week could still tilt bullish since the Jupiter-Neptune alignment remains in effect. But any upside would seem to be more temporary as the bullish influence could be fleeting. Bulls should therefore be careful, even if the market seems like it is stabilizing. Any Jupiter effects are likely to be overshadowed by approaching Full Moon/lunar eclipse on the 21 st as well as a series of Saturn alignments that are clustered in the second half of January. Bulls may be able to breathe easier in late February and March when Jupiter again strengthens ahead of its retrograde station in early April. The technical outlook is mixed. Last week failed to break above the previous high and reversed lower at 10,900. Friday s low reversed higher at the 50 DMA and thus bulls could point to a higher low. But the net result is a possible pennant pattern and an indecisive market. The other point to note is that this is a possible right shoulder formation given the January 2018 (left shoulder) high of 11,200. We could see incrementally higher highs in the coming days, but the 11,000-11,200 zone is key resistance. If it is

6 rejected in the coming weeks, it could set up another pullback to the neckline at 10,000. Any subsequent breakdown at this level would have a downside target of We are still some ways from there, but it is worth noting how important it is that the Nifty pushes above 11,000 fairly soon. To be sure, the current trading range of 10,600-10,800 is made more important because the 20, 50 and 200 DMA all converge here. Bulls need a weekly close above this zone while bears will be looking for a decisive weekly close below this range. More immediately, I would think even a daily close below 10,500 could signal an imminent retest of 10,000. The weekly Sensex chart looks mixed also. The current rebound seems to be stalling at the middle Bollinger band (20 WMA). The 36,000 level is also a 50% retracement from the ATH to the recent low at 33,000. Bulls need a weekly close above that level in order to bring more capital into the market. If bulls fail to put in a higher weekly close in the near term, then the measured move downside target would be close to 30,000 near the 200 WMA. Meanwhile, ICICI Bank put in a positive week but it is coming up against horizontal resistance. The chart is still bullish for now as the more touches of resistance, the more likely the resistance will be broken. Infosys followed the broader markets lower last week as investors are showing some caution here. The clustering of the moving averages suggests a large move is likely in the near term. However, there is a growing risk of a sell-off if we see a daily close below the 200 DMA. This week is hard to call due to the mix of influences in play. The Mercury-Mars square is likely to produce at least one significant (>1%) down day this week but it is a slow moving aspect which could hit on any day. Perhaps Monday and Tuesday lean a bit more bullish in this respect as the Moon aligns with Jupiter and Neptune. Tuesday looks more bullish than Monday on that score. The second half of the week is more bearish although Friday could see some upside. If the early week does prove to be more positive, then perhaps we will see a retest of last week s high at 10,900. I am unsure if we could see a move to 11,000 although it is certainly possible.

7 But since there is likely to be some downside along the way this week, I wonder if there will be another rejection of resistance at 10,900 (or lower) and then a retest of Friday s low at 10,600. Next week (Jan 14-18) looks a bit more bearish. I would be surprised if we got a fullblown sell-off here but there is a rising downside risk. The early week leans bearish in this respect as Mercury conjoins Saturn on Monday. The midweek may be less clearly negative but I would be reluctant to forecast much of a bounce. The late week may be more bullish on the Moon-Venus-Jupiter alignment. Given the mix of influences, we cannot completely rule out a bullish outcome but the odds favour some downside, especially if the previous week has turned out to be bullish. The following week (Jan 21-25) looks more bearish given the lunar eclipse of the 21 st. In fact, there are a couple of major alignments that are exact in the early week which could signify moves in both directions. Monday s Venus-Jupiter conjunction is bullish and could possibly coincide with a sharp rise. And yet the Mars-Saturn square is exact the same day. I would expect volatility to rise here although I do think bears will have the final word during this week. Bulls may have to wait until mid- February and the Mars-Rahu square aspect before the market can climb once again. This is not to say that we are likely to see a major pullback. But I do think that a period of market weakness is likely in late January and early February. It is quite possible we could see the Nifty fall to 10,000 at least. Another rebound is likely in the second half of February and into March and early April. Higher highs seem unlikely, however. Stocks may be more vulnerable to more downside after April with June looking especially bearish as bearish Saturn conjoins unpredictable Ketu. I think a break below 10,000 is almost inevitable by Q3 and it could well occur before that time. It is possible we could see that downside target of 8300 at some point in 2019 although 9000 may be a more prudent target. Technical Trends Astrological Indicators Target Range Short term trend is UP bullish (confirming) 10,600-10,900 (1 week ending 11 Jan) Medium term trend is UP bearish (disconfirming) 10,000-10,400 (1 month ending 11 Feb) Long term trend is UP bearish (disconfirming) 9,000-10,000 (1 year ending Jan 2020)

8 Currencies The Dollar finished the week slightly lower as dovish testimony from Fed Chair Powell hinted at fewer rate hikes in The USDX slipped to while the Euro ended the week at and the safe haven Yen bounced off its low of 108. This bearish outcome was unexpected as I thought we could see the Dollar push up to resistance. Alas, it s not happening yet. The chart is actually looking more bearish here as the 20 DMA is serving as resistance. There is a real risk of a breakdown to the 94 area below the 200 DMA in the event of a close below 95. The chart would become more bullish with a close above the 20 and 50 DMA at With the Fed sounding more dovish once again, there may be a less compelling case for the long Dollar trade. Even the strong jobs report on Friday had little effect as jobs data is seen as lagging and hence not indicative of future growth. However, progress in the US-China trade talks this week could resurrect the long trade and take the greenback higher once again. The weekly Euro chart remains stuck in a narrow range although we have recently seen a series of slightly higher lows. As before, the Euro will likely need a weekly close above 1.15 and the 20 WMA in order to enjoy significant upward momentum. It could still break down from here. This week looks mixed. January seems to be more bullish for the Dollar although so far that has not been the case. The early week carries an additional downside risk on the Mercury-Mars alignment. The chances for gains will increase on Wednesday and then for the rest of the week. Since I am bullish for January as a whole, I would like to think there is some upside overall this week. And yet, if the early week sees weakness, it could complicate the technical picture since any significant downside would break support at Next week (Jan 14-18) looks more bullish as Mercury aligns with Jupiter on Monday and then the Moon aligns with Venus and Jupiter on Friday. We could see the Dollar start to pick up momentum at the end of January and into early February as this should correspond with another pullback in stocks. The Dollar should begin to weaken sometime in February and then trend lower through March and April. This pullback should at least test the 200 DMA and will likely fall further. Another rally is likely to begin by May and continue through

9 the summer with a significant interim top occurring in August or September. The Dollar should gradually weaken in Q4 and then trend much lower through Technical Trends (Dollar) Astrological Indicators Target Range Short term trend is DOWN bullish (disconfirming) (1 week ending Jan 11) Medium term trend is UP bullish (confirming) (1 month ending Feb 11) Long term trend is UP bearish (disconfirming) (1 year ending Jan 2020) Crude oil Crude oil finally got its oversold bounce last week as dovish comments from the Fed and a strong US jobs report boosted sentiment. WTI climbed almost 6% to $48 while Brent jumped 8% to $57. This bullish outcome was in keeping with expectations as I thought the midweek Mercury-Venus alignment would coincide with more optimism. The bounce was fairly predictable perhaps given WTI matched its June 2017 low at $42. This test of support encouraged bargain hunters to step in but it is unclear if this will be a durable bottom. Friday s close settled at the 20 DMA which is typically an indicator of the upper limit to a weak bearish bounce that may not go anywhere. The early December rebound failed to clear the 20 DMA so this rebound may well suffer the same fate. A daily close above $50 is likely the first step in a longer rebound that can bring in more money to the long side. Even some sideways moves may not be bad news for bulls as a bottom may require a retest of

10 $42 or even a protracted period of trading in a narrow range. The weekly Brent chart looks more bullish after the test of $50. After the weekly close above the long term 200 WMA, there is more reason to be bullish with this chart. Immediate support at $55 needs to hold, however, if further upside will happen in the coming days. If not, we could see a retest of $ This week could see further upside although I would expect some declines also. The Mercury-Mars square is very likely to deliver at least one down day this week. It seems more likely to happen Monday or Wednesday with Monday looking a bit worse than Wednesday. Tuesday looks more bullish on paper as the Moon aligns with Jupiter and Neptune. I m very uncertain about Thursday and Friday, however. The Sun-Pluto conjunction at that time looks quite negative but Thursday s Moon-Neptune conjunction may be a bit positive. This lack of clarity suggests that consolidation lower is very possible this week, even if it the bulls will likely resume control next week or the week after. I tend to think the week will be somewhat bullish in any event but we shall see. Next week (Jan 14-18) also leans bullish albeit again with some significant downside likely. The early week is perhaps more bearish as the Sun conjoins the Lunar Node. But the second half of the week looks more bullish as the Moon aligns with the Venus-Jupiter conjunction. If crude has indeed declined in the first half, there is a decent chance for a solid rebound later in the week. The following week (Jan 21-25) could bring fresh volatility, however, as the lunar eclipse of the 21 st and the Mars-Saturn square may shift the mood of the market. While we should see a week or two of bearishness, I m not convinced the pullback will be too dramatic. The alignments lean bearish but they also reflect considerable ambiguity. Therefore, I would say that while lower lows are possible, the indications are not strongly bearish enough to make that a likely outcome. We may instead see crude retest the lows of $42/50 into early February. Even if February begins on a negative note, there is good reason to expect a rebound before the end of the month. Crude should trend higher through March and April, although I would only assign a moderate probability to that bullish forecast. The rally will likely reverse sharply lower in April-May and we could see a significant correction through the summer. How low it goes depends on where it may top out at in Q2. If we get a lower high of $60-70 for WTI in Q2, then the correction could well generate another test of long term support at $42 by September, and possibly lower. Technical Trends Astrological Indicators Target Range (WTI) Short term trend is UP bullish (confirming) $48-52 (1 week ending 11 Jan)

11 Medium term trend is DOWN bearish (confirming) $45-50 (1 month ending 11 Feb) Long term trend is DOWN bullish (disconfirming) $50-70 (1 year ending Jan 2020) Gold Gold pushed higher for a third straight week although the rally is showing signs of flagging. After trading as high as 1300, gold settled at 1285, up $3 for the week. This bullish outcome was in keeping with expectations although I thought we might have finished a bit closer to 1300 by Friday. Nonetheless, the test of 1300 on Friday was indicative of the ongoing optimism surrounding gold as a safe haven play. At the same time, we may wonder if the top may be near or indeed, already be in after this week produced a candle with a long upper wick at resistance. This hints at more downside consolidation in the coming days. Friday s daily candle is classic reversal signal as it tested resistance and then finished much lower. Moreover, there is a mix of influences here with gold which could confound the bulls strategy. The Fed is looking more dovish after Powell s Friday statement and this is more bullish for gold. However, if stocks continue to rebound on good economic data and perhaps encouraging trade news from this week s US-China talks, then one rationale for the long gold trade will have been removed. And yet even if gold is entering a short period of consolidation under resistance, the chart is still fairly bullish and suggests that dips will likely be bought, at least initially. Support is likely near the 20 DMA at The technicals will only worsen significantly if we get a lower high (e.g. 1280) after an initial pullback to

12 This week looks more bearish as Mercury squares Mars. The first half of the week looks more bearish in this respect so we are likely to see that follow through on the downside after Friday s big reversal lower. If we have seen a pullback across Monday and Tuesday, the chances for some upside will increase through the rest of the week. The Sun-Pluto conjunction is not a clearly bullish influence but it could go either way. At least it is not a clearly bearish influence. Even if the late week turns positive, I would lean towards a bearish outcome overall this week. Next week (Jan 14-18) also leans bearish as the Sun conjoins the South Lunar Node in the first half of the week. The second half of the week could see a recovery on the Venus-Jupiter conjunction. A weekly gain is quite possible here although the downside risk remains significant. The following week (Jan 21-25) looks choppy. The early week could see a brief rise but the rest of the week looks less positive. I would keep an open mind about where this week may finish. Gold may bottom sometime in late January or early February. The planets look more positive in late February so that should indicate the start of a new move higher. I would expect this rally to extend through March and into April. I have no fixed ideas where gold may top out at. Probably above 1300 but beyond that it is hard to say. A significant correction is likely to begin in May and price should trend lower through the summer. The low for 2019 is more likely to occur in Q3. A more significant rally is likely to begin in late 2019 and continue through Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) (1 week ending Jan 11) Medium term trend is UP bearish (disconfirming) (1 month ending Feb 11) Long term trend is DOWN bullish (disconfirming) (1 year ending Jan 2020) 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

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