12 January 2019 Volume 12, Issue 3

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1 12 January 2019 Volume 12, Issue 3 Summary for week of 14 January 2019 Stocks vulnerable to declines this week Dollar likely to bounce Crude oil more mixed this week with bearish bias in first half Gold prone to pullbacks this week US Stocks Stocks extended their bounce last week on more dovish Fed comments and signs of progress in the US-China trade talks. The Dow gained more than 2% on the week to 23,995 while the S&P 500 finished at This bullish outcome was in line with expectations although the absence of any significant down day was surprising. Hope springs eternal for the stock market participants, especially when Fed Chair Jay Powell has your back. Powell s recent comments have calmed frayed nerves as the market no longer expects multiple rate hikes this year. The Powell put is now very much in play as the Fed realizes that the health of equity market and the subsequent wealth effect is included in its mandate to foster the conditions for economic growth. It remains to be seen how effective Powell s dovish jawboning will be in the medium term, especially if it is not followed up by actual dovish action. But for now, there is a better fundamental case for owing stocks, all other things being equal. A collapse of the China talks would be bearish, of course, but any kind of deal would

2 be bullish. The DC shutdown may no longer have much more downside, while a resolution would also be bullish. The planetary alignments are still generally bullish for Q1. January s Jupiter-Neptune alignment has largely delivered the expected upside while the Jupiter-Pluto alignment due in late February and March hold out the very real possibility for further upside (2800? 2900?). It may be a more complex story in the short term, however, as the upcoming Mars-Saturn square and Full Moon of January is likely to mark a pullback. The key question is whether this will be a minor pullback to a higher low ( ) or whether it could start a more significant pullback that produces an approximate retest of the December 26 low of 2346, say between 2300 and I m a bit more bullish after this week s failure to see any downside on the Mercury-Mars square. To be sure, Thursday saw a sizable intraday decline but bulls are stronger that I thought they would be at this time. Last week, I was leaning towards a larger decline to a retest (e.g ) but I m now leaning (60/40) a bit more towards a higher low (e.g ) during this late January/early February period. Let s first see how this week upcoming plays out. The technical situation is looking bearish for the short term. That s because the SPX is pushing up into its resistance zone at 2600 and therefore we should expect some kind of retracement in the coming days. It is possible we could see more upside as the upper resistance zone extends to the 50 DMA at 2635 and even up to We should note that 2650 would equal a 50% retracement from the Sep high to the Dec low so that is one possible upside target of this bounce. Of course, 2600 may act like a barrier so we could see a reversal as soon as Monday based on the technicals alone. We can discern a bearish rising wedge pattern since the Dec 26 low which has resistance near and support at or so. A break below 2580 could start a quick move lower at least down to a rising channel trend line support level near More generally, if 2600 is broken to the upside, then it will act as support initially. After that, support may be stronger at which reflects the early January low and the 20 DMA. It s a similar picture with the NDX chart as it has rallied back to its 50 DMA and is now pushing against falling channel resistance. A 50% retracement from the high of 7700 is around 6800 just a little above the current level. Some kind of pullback looks likely fairly soon. The weekly Dow chart illustrates the possibility that this is could be a V-shaped bottom. There is overhead resistance above 24,000 so that will produce some kind of

3 consolidation but it is possible that it may be minimal. Stochastics are in a strongly trending bullish crossover above the 20 line so the bounce could have further to go. That said, the downward slope of the 20 and 50 WMA is bearish for the medium term and if there is a bearish crossover, that will only add to the technical problems in this chart. Meanwhile, bond yields are rising once again despite very modest inflation data last week. The Fed s new dovish stance may well have reversed the downward trend for yields for the next while. This week looks more bearish. The Full Moon/lunar eclipse will take place on the night of Sunday the 20 th so the time leading up to it tends to bearish in any event. We also have the Mars-Saturn square forming over next weekend which will also increase the chances of some downside during this week. Monday leans somewhat bullish, however, on the Mercury-Jupiter-Neptune alignment. This could conceivably push the SPX above 2600 for a day or even two. Tuesday looks less positive, as the Sun conjoins the South Lunar Node. The rest of the week has an added bearish burden also as the Sun will align with Mars on Wednesday and Saturn on Thursday and Friday. Friday may be less bearish due to a more positive Moon placement opposite Jupiter, however. Overall, I think we should see a break below of that rising wedge pattern and a move to 2500 is possible. However, if the early week is bullish and we get a daily close at 2620 or above, then the low for the week may be somewhat higher, such as We shall see. Next week (Jan 21-25) could be decisive in terms of whether or not we will get a hard retest of the Dec 26 low. Monday is closed for the MLK holiday the same day as the Mars-Saturn square and the Venus-Jupiter conjunction. There is a lot going on here in the sky early in the week which makes it more difficult to predict with confidence. I had thought big moves in both directions were quite possible. But when markets re-open on Tuesday, the Full Moon will be behind us, and Mars will have moved past its square with Saturn. This increases the possibility for some gains on Tuesday and they could be fairly large. I would not rule out a bearish outcome here, but I would lean bullish. If Tuesday is strongly bullish, then we could see stocks end their retracement and push higher once again. It may be the critically decisive day in a decisive week. Wednesday looks more bearish as Mercury aligns with Saturn. The late week looks more bullish again as Mercury aligns with Jupiter. The following week (Jan 28-Feb 1) looks bullish to start on the Sun-Mercury conjunction. Although the late week should see some selling, I would lean bullish overall here. February looks choppy but the approaching Jupiter-Pluto alignment later in the month suggests the bulls are more likely

4 to have the last word. The first half of the month could see more sideways trading as bulls negotiate key resistance at the 50 DMA at 2650 and perhaps at the 200 DMA at March also could bring more upside although it looks less clearly bullish. The planets look more mixed in April, however, so that could signal the end to any sustained rebound we have seen in Q1. The bearish influences will intensify in late April and May as Saturn turns retrograde and conjoins the South Lunar Node and Pluto. This negative triumvirate is likely to drag down sentiment from spring until Sep-Oct. At least another 20% correction is quite likely during this May to October period. Depending on where stocks have topped out at, a bear market is therefore more likely than not in Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) SPX (1 week ending Jan 18) Medium term trend is DOWN bullish (disconfirming) SPX (1 month ending Feb 18) Long term trend is UP bearish (disconfirming) SPX (1 year ending Jan 2020)

5 Indian Stocks Stocks pushed higher last week on hopes for a US-China trade deal and greater liquidity after more dovish comments from the Fed. The Sensex rose by almost 1% to 36,009 while the Nifty finished at 10,794. This bullish outcome was in keeping with expectations, even if we did not see any sizable declines given the bearish Mercury-Mars alignment. The market appears to be in a holding pattern here as traders await fresh catalysts. There is growing concern that the Feb 1 interim budget could see a worsening of the fiscal situation with more populist handouts ahead of the election. This could put increasing pressure on bonds and the rupee. Domestic concerns could therefore potentially undermine some otherwise favourable global developments as central banks are widely expected to chart a very cautious course back to rate normalization. Fed Chair Powell may well ease the schedule of quantitative tightening (QT) whereby the Fed reduces its balance sheet. Powell seems to have blinked in the face of the recent sell-off so the Fed put is alive and well once again. Markets will not be permitted to fall too much before the Fed intervenes. However, jaw-boning is one thing, but actions are another. The Fed will have to follow up its dovish talk with action in the coming months or the selling could resume. The astrological alignments lean bearish over the next two weeks or so. The Full Moon/lunar eclipse of Jan is likely to damage sentiment this week and possibly next week as well. The Mars-Saturn square alignment on Monday the 21 st may also correspond with some bearish developments although gains are more likely after that date. Therefore, it is possible this time window around the lunar eclipse may be fairly brief in terms of negative fallout. Early February is less bearish perhaps and more mixed in the wake of the budget announcement. However, stocks will become more vulnerable to declines by mid-february perhaps on the Mars-Uranus conjunction. While there is considerable uncertainty in these alignments, generally speaking I would say that a bullish breakout above 11,000 looks less than probable. And if this week is bearish as I expected, then we are more likely to see support levels tested

6 rather than resistance over the next 6-8 weeks. Stocks may be in a better position to rally by March. We shall see. The technical outlook is unclear. The Nifty is trading in a narrowing range as investors look for direction. The importance of the current circumstance is reflected in the fact that the Nifty sits at the convergence of the 20, 50 and 200 DMA at 10,700-10,800. A breakout above resistance at 11,000 would be bullish obviously, and could lead to a retest of the alltime highs of 11,760. Bulls should still be alert to a possible false breakout above 11,000 which shakes out the short positions. The Nifty would have to sustain above 11,000 for a second daily close for it to be more compelling. Conversely, support is likely crucial near the 50 DMA at 10,710. A daily close below this level would touch the lower Bollinger band and increase the risk of a larger pullback. But here again, the possibility for a shake out of weak bulls is higher than normal given the narrow trading range. It may require two daily closes below 10,600 or better, 10,500 to confirm the down move. If 10,500 breaks, then we could see a quick fall down to support at 10,000-10,200. This would likely be a place where buyers would enter although I suspect they would be short term bulls looking for a bounce, rather than medium term bulls expecting a return to all-time highs. The weekly Sensex chart highlights the vulnerability of the charts now as the middle Bollinger band is acting as resistance. A failure to get a weekly close above 36,500 would increase the risk of a head and shoulders top. Bulls could still tolerate a losing week this week, say, to 35,000 without hitting the right shoulder panic button. But anything below that would be bad news for this ongoing rebound. Meanwhile, Tata Motors enjoyed a modest gain last week despite Friday s sell-off. While the share price has been beaten down for ages, it is setting up a possible bullish inverted head and shoulders pattern. If this pattern plays out, it would target the 250 area near the 200 DMA. This would likely be just a bear market rally but it could set the stage for a longer term recovery in the stock. HDFC Bank also moved a bit higher last week as it pushes up against resistance. The chart is still bullish and hints at a possible breakout higher above The ascending triangle pattern would suggest an upside target of 2150.

7 This week looks more bearish than last week. The approaching eclipse is bad enough but there is also a Sun-Ketu conjunction on Wednesday that is likely to further tip the scales towards the bears. The Sun also forms a minor but still significant alignment with Mars after Monday so I would think the chances are good for a sizable pullback between Tuesday and Thursday. Monday looks less bearish given the Mercury-Jupiter alignment. Bearish investors should therefore be prepared for the possibility of a push higher on Monday. But the bears chances appear to improve after Monday so I would think the week as a whole will finish in the red. One possible scenario would be a push up towards resistance at 10,900 on Monday but then more selling afterwards and the likelihood of a test of support at 10,600. I think the chances are fairly good that we will see that broken, although perhaps 10,500 will hold. We shall see. The Moon s alignment with Venus and Jupiter later in the week should offers bulls some hope for a bounce on Thursday or more likely, Friday. But I would be skeptical about the chances for a bullish week. Next week (Jan 21-25) looks more mixed. Monday s eclipse has an added bearish risk although I would not say it is a high probability daily set up. Tuesday and Wednesday could see some upside on the Venus-Jupiter conjunction. The late week looks more negative although not strongly so. I would keep an open mind here even if Monday turns out to be very bearish. The following week (Jan 28-Feb 1) looks choppy but with a bullish bias as the Sun conjoins Mercury and Venus aligns with Uranus later in the week. The early week could be somewhat bearish but I would expect a positive week overall. The period around the Mars-Uranus-Rahu alignment in mid-february looks bearish but it is possible stocks could stay in a narrow range (10,500-11,000) until that time. I m uncertain although much will depend on what happens this week (Jan 14-18) and whether support at 10,500 holds. But bulls should be cautious in February as lower lows are possible, such as a retest of 10,000. I m not sure sentiment will get that bearish, but it s possible. March looks more bullish, however, as Jupiter aligns with Pluto and then stations retrograde while maintaining that alignment. It should coincide with some significant upside. April looks more mixed, however, and there is some risk that any rally could reverse lower. May and June look bearish as well and therefore we could see a larger down trend begin in Q2. By the time Saturn conjoins Ketu and Pluto in June, we could see the Nifty testing 9000 or even falling below that level. July should bring a powerful oversold bounce but August and September look bearish again. This could conceivably produce lower lows by late September or early October.

8 Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) 10,500-10,800 (1 week ending 18 Jan) Medium term trend is UP bearish (disconfirming) 10,000-10,400 (1 month ending 18 Feb) Long term trend is UP bearish (disconfirming) 9,000-10,000 (1 year ending Jan 2020) Currencies Last week saw the Dollar slide further on move dovish comments from Fed members and low inflation data. The USDX rebounded late in the week but still lost half a cent to while the Euro finished at This bearish outcome was somewhat surprising although I thought the early week looked negative while the second half of the week argued for a bounce. This is more or less what happened as the Dollar fell on Monday and Wednesday before partially recovering late in the week. The Dollar is well on its way to a tagging of the 200 DMA at A previous low at and another support level the market may be tested in the days ahead if the selling continues. While the chart is still medium term bullish due to the rising 200 DMA, it seems very likely that a test of that line is imminent. The short term bearish orientation of the chart should not hide the fact that the Dollar is still trading within a rising channel with support near 94 and resistance near 98. Bulls may therefore find the current levels attractive entry points for long positions. The weekly Euro

9 chart is still trading within that falling wedge pattern after the rejection of resistance at 1.15 last week. A weekly close above 1.15 would make the Euro much more bullish, while further downside could produce a test of wedge support at This week looks more bullish for the greenback. Monday s Mercury-Jupiter alignment is the first opportunity for the bulls. The midweek is perhaps more mixed but the late week is probably most bullish as the Moon aligns with Venus and Jupiter. I would be quite surprised if the Dollar didn t bounce this week. Next week looks even more bullish as Venus conjoins Jupiter. A large move higher is very possible here. We should see further upside in the following week (Jan 28-Feb 1) as the Sun conjoins Mercury. Some consolidation is likely in early February, however, and this could begin a protracted sideways phase in the Dollar. I tend to think it will begin to trend lower through March and April although it is possible it may remain above key support such as the 200 DMA. April looks more bearish than March in that respect. We could see a significant bottom in May after which the Dollar should begin to rally. This up trend may last through the summer with a possible top in September. This looks to be the high for the year in the Dollar. A correction should follow in Q4 with a more substantial down trend likely for Technical Trends (Dollar) Astrological Indicators Target Range Short term trend is DOWN bullish (disconfirming) (1 week ending Jan 18) Medium term trend is UP bullish (confirming) (1 month ending Feb 18) Long term trend is UP bearish (disconfirming) (1 year ending Jan 2020)

10 Crude oil Crude oil extended its bounce last week as sentiment about the economy improved while the Dollar weakened. WTI gained 5% to $51.59 while Brent finished above $60. This bullish outcome was more or less in keeping with expectations although the absence of much downside was surprising. Crude has pushed up towards its key resistance level here at the 50 DMA. There is also a lot of overhead supply which will likely make any further upside more difficult for bulls. Friday s candle looked like a possible trend reversal after the intraday higher high and then the negative close. While further upside towards $55/62 is possible this week, there is a greater technical likelihood for some follow through on the downside. Immediate support for WTI is $50 and below that would likely be the 20 DMA at $48. $48 would be about a 50% retracement from the low of $42 so that could be a crucial support area going forward. Anything below the 20 DMA would strongly suggest a retest of the December low. The weekly Brent chart shows how the current bounce is just an early stage of a possible recovery. A standard 50% retracement off the high would translate to $68-70 near the 20 WMA. Even if this rebound continues for several more weeks or months and reaches $70, it would still be at risk of falling back towards its previous lows. This would be even more likely if the 20 and 50 WMAs were still sloping down. The chart would become more promising over the longer term perhaps if there was a retest of the December low sooner rather than later. The double bottom would be a better level from which to begin a sustainable bullish trend. This could see further gains although the first half of the week may have a bearish bias. Monday s Sun-Moon square is somewhat bearish as is Tuesday s Sun-Lunar Node conjunction. Since I generally have a bullish bias for January, I would be surprised if we got significant technical damage on any declines this week. Dips are therefore likely to be bought, whether at $50 for WTI or $48. The second half of the week should be more positive and should be enough for a flat to positive weekly close. Next week (Jan 21-25) will be holiday-shortened but should see more upside as Venus conjoins Jupiter on Tuesday. Even if the preceding week has been fairly neutral, I would expect the rally to resume more strongly. The following week (Jan 28-Feb 1) also has some bullish potential given the Sun-Mercury

11 conjunction. This may be a more modest gain but it does not look bearish either. February may see the rebound consolidation and reverse lower. I would expect a possible interim low around the Venus- Saturn conjunction on Feb 18. This should be a higher low, however, and it should resume its rebound in March and April. Crude may peak in April or May and then begin a major correction which lasts through the summer. At this point, I am uncertain where it could top out (WTI=$65-75?), although a higher high seems unlikely at this point. An equal or lower high would seem to be a more logical technical set up from which a large sell-off can take place. Technical Trends Astrological Indicators Target Range (WTI) Short term trend is UP bullish (confirming) $50-55 (1 week ending 18 Jan) Medium term trend is DOWN bearish (confirming) $45-55 (1 month ending 18 Feb) Long term trend is DOWN bullish (disconfirming) $50-70 (1 year ending Jan 2020)

12 Gold Gold edged higher last week on more Dollar weakness and further dovish comments from Fed members. Gold failed again to break above 1300 and finished the week up 4 dollars to This bullish outcome was unexpected as I thought we might get more early week downside. Gold is encountering some significant resistance at 1300 here after rallying from its August low of It is trading in a narrow range with support at Dips are getting bought as bulls attempt to push above If there is a breakout, the initial upside target would be An extended consolidation phase below 1300 is still quite possible and would be compatible with an eventual bullish breakout. And yet in the short term, a close below 1280 would be more bearish and could shake up the current state of market equilibrium. The favourable technicals are reflected in the imminent golden cross of the 50 and 200 DMA. Even if there is a retracement here at 1300, it bodes more positively down the road. But could gold be overbought? RSI recently touched the 70 line and is trending lower while stochastics are threatening to fall below the 80 line. MACD has begun a bearish crossover which could signal the end to the current phase of the rally. The gold chart will stay generally bullish as long as it trades above key horizontal support at Any move below that level and there is a major risk of a retest of This week leans bearish as the Sun conjoins the Lunar Node. Monday is somewhat less bearish although I wouldn t necessarily expect a push above 1300 either. Nonetheless, there is some upside potential in the early part of the week. After Monday, I would think the odds shift towards the bears. Thursday is somewhat more bullish than either Wednesday or Friday. Friday s Sun-Saturn alignment suggests a somewhat higher probability of some downside. There is a decent chance for a move below 1280 at some point this week. Next week (Jan 21-25) begins regular trading on Tuesday after the Monday holiday closing in the US. This could see some big moves in either direction given the mix of bullish and bearish alignments. The Venus-Jupiter conjunction is bullish but the Mercury-Node conjunction is quite bearish. I would lean bearish but with only moderate confidence. The second half of the week looks more bullish, however,

13 so it is possible we could see gold retest resistance at The following week (Jan 28-Feb 1) looks somewhat bullish as the Sun conjoins Mercury. It is possible that we could see gold actually move above 1300 although I would not expect a strongly bullish up move. Gold could even make an interim high in early February (1300? 1320?) but then it is likely to pullback significantly into mid-february as Mars squares the Lunar Nodes. I would not necessarily expect any technical damage from this pullback (1250?) so this will likely be used as a buying opportunity for bulls. The rest of February and March look more bullish as Jupiter aligns with Pluto. Gold could top out sometime in April. The outlook for gold will get significantly more bearish starting in May and continue through most of the summer. An interim low is likely in August-September. This could entail a retest of the 2018 low of although let s first see where gold ends up in Q2. Gold should begin to rally again in Q4 and extend its gains through Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) (1 week ending Jan 18) Medium term trend is UP bearish (disconfirming) (1 month ending Feb 18) 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