23 September 2017 Volume 10, Issue 39

Transcription

1 23 September 2017 Volume 10, Issue 39 Summary for week of 25 September 2017 Stocks more vulnerable to declines this week Dollar mixed this week with possible bounce late Crude oil likely to retrace, especially early Gold could extend decline this week US Stocks Stocks edged higher on the week after the Fed announced its plan to begin unwinding QE assets in October. The Dow added just 80 points on the week to while the S&P 500 finished at This slightly bullish outcome was more or less in keeping with expectations although I thought we might have seen more downside along the way. But the modest move above 2500 reflected the prevailing Jupiter influence. The market easily digested the Fed s commitment to normalize rates this week. Odds of a Dec hike rose sharply and are now above 70% as the Fed looks poised to further retreat from its emergency measures following the 2008 financial crisis. Most market participants do not expect any significant dislocation from this withdrawal of liquidity, even if bond yields are likely to rise. Higher yields are compatible with higher stock prices for a while, although eventually we could see an inverse relationship take hold when yields rise to a point where they attract capital away from equities. The situation is potentially complicated by role of the Fed and other central banks who have bought debt assets in order to suppress yields and boost stock prices. As the Fed and ECB end their intervention, the market mechanism will be allowed to operate more freely once again. Valuations are now very high due to the easy money policies, so the slack will have to be taken up by higher levels of economic growth. Tax reform and a big infrastructure bill would go a long way towards raising GDP. If they are delayed, then markets could lose their faith in this Trump rally.

2 The astrological outlook looks more negative again as we close the 3 rd quarter and head into October. While I was wrong in my expectation that a decline could well extend from August into October, there are still some important bearish influences that have yet to be accounted for. The mid-september Jupiter influence was stronger than expected and that has coincided with higher highs. But that Jupiter influence may be weakening after this week as Jupiter separates from its alignment with Uranus. The Jupiter-Uranus pairing is bullish but once Jupiter as the faster planet separates, it could weaken optimism and increase the odds of a decline. This is what will happen this week on Wednesday and Thursday. This reduction in optimism is one reason why I think a large pullback, if not outright correction, is likely as we move into October. The technical outlook is bullish. The higher highs on the SPX to 2508 gave the bulls bragging rights that the up trend is intact. Marginally higher highs may not necessarily count for much if key immediate support at 2490 is broken, however. That said, channel or rising wedge resistance may be as high as 2520 so bulls could stage another rally in the event of a pullback. Even a pullback below 2490 would not jeopardize the current rally. The 50 DMA is currently acting as approximate support and this line now stands at A violation of this line is still quite possible as long as a higher low is put in, such as The bears could only break out the champagne if there is a move below the previous low of A test of the 200 DMA will happen eventually but even now it stands at This is just 5% below current levels. Given the planetary alignments, I think a retest on that line is likely in coming weeks. Of course, bulls would correctly regard such a decline as a buying opportunity. But if the SPX is in a rising wedge dated from the November 2016 low, then it could resolve into a rising channel. This would suggest support below the 200 DMA perhaps closer to , depending on the timing of the retracement. Given the upcoming planetary indicators, this kind of pullback seems plausible although even there it would not constitute a 10% correction. The Bullish Percent Index has followed the indexes higher in September although last week saw a small erosion of the up trend. Bulls will need to try to expand the breadth of the rally by pushing this index to higher highs above 70 soon. The weekly Dow chart is overbought on stochastics but it is in a clear bullish crossover. Bears may have to wait for a move back below 80 before a sell position is prudent. This chart more than any other shows that we are in the midst of a powerful bull market where dips and corrections are likely to be bought. Even a decline to the 50 WMA at 20,000 would not alter the fundamental up trend in place and would be a reasonable buying opportunity. As mentioned above, bond yields spiked last week after bouncing off support. The 10-year rebounded after testing channel support at 2.05% and finished at 2.25%. Channel resistance is near 2.3% and the 200 DMA so we could see some hesitation there if the rally continues. This post-fed rise in yields is so far not that significant as only a move above 2.6% would turn heads.

3 This week tilts even further away from the bulls, although I m reluctant to forecast too much downside. Monday s Mercury-Saturn square aspect looks bearish and could actually produce a decline. Tuesday s Moon-Saturn conjunction may also lean towards the bears, although less so perhaps. But I would say the chances are good for a decline on one of those two days, and a net decline across both days is also looking likely. Some gains are more likely at midweek, perhaps around Wednesday s Mercury-Jupiter alignment. By Thursday, Jupiter-Uranus moves into an exact opposition so that could mark a decline during the late week. Friday leans a bit bullish, however, as Mercury aligns with the Moon. Overall, I think there is less of a chance for higher highs. Some upside is possible, of course, but the higher probability of some offsetting declines may mean that gains will not hold. I think 2490 should be doable and it is possible we could see something lower than that. But that will likely depend more on the early part of the week. Next week (Oct 2-6) looks more bearish as Venus approaches its conjunction with Mars. In addition, Mars is in mutual aspect with Saturn. This is exact the following week but we could easily see some fallout here. I think the second half of the week has a better chance for some declines although Tuesday stands out as being more bearish than either Monday or Wednesday. The following week (Oct 9-13) also looks bearish as Saturn exactly aligns with the Lunar Nodes on the 9 th just as Venus enters Virgo. It is difficult to estimate what size of decline is possible. Mid- October could see a bounce as Mercury conjoins Jupiter on the 18 th.. This is likely to be a fairly weak technical bounce after a preceding pullback. A lower high is likely. But then Saturn enters Sagittarius on Oct 25 th so that could again reflect some stress in the market. While November could see some upside, the late November and early December period looks quite bearish. There is a possibility of a significant second leg lower from late November to January. This would produce a lower low by January. While I m not certain Dec-Jan will produce a medium term down trend, there are some difficult aspects in the mix that could tip the balance in favor of the bears. Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) SPX (1 week ending Sep 29) Medium term trend is UP bearish (disconfirming) SPX (1 month ending Oct 29)

4 Long term trend is UP bearish (disconfirming) SPX (1 year ending Sep 2018) Indian Stocks Stocks lost ground last week as Korean tensions again weighed on sentiment. The Sensex lost 1% to 31,922 while the Nifty finished the week at This bearish outcome was somewhat surprising, although I was unsure if bulls could prevail yet again given the assembly of approaching negative alignments. I mistakenly thought the late week would be positive, although I noted the density of aspects made that a more difficult prediction. Markets may be taking a breather here as global cues look less promising in the near term. The downgrade of Chinese debt is a new source of worry for FII which could limit inflows. And if the Fed s relatively hawkish statement from last week is factored in, investors may be displaying a greater skepticism. India Inc will have to prove its worth through earnings and economic growth as global liquidity may dry up. Unfortunately, GST confusion and inefficiencies may act as a drag on growth for a while yet. The planetary outlook remains on balance negative for several more weeks. Jupiter s mostly positive influence is likely to weaken this week after the Uranus opposition becomes exact on Thursday. As Jupiter separates, there is an increasing downside risk for several weeks. Also, the negative influences are likely to grow as Saturn is due to align with Rahu on 9 th October. Both of these planets are slow moving, so the effect could manifest somewhat before or after the exact aspect. Moreover, Venus enters Virgo also on the 9 th where it will remain until early November. The combined effects of these influences argue against a quick recovery in stocks. Indeed, the case for further downside in October looks more compelling. Some kind of rebound looks possible for November, but December looks less positive again. This would tend to suggest that the market could have difficulty regaining its previous upward momentum. And if December and January are more bearish, then it is possible we could see lower lows in early 2018.

5 The short term technical outlook looks mixed. Last week s sudden decline to the 50 DMA raises questions about the viability of the current rally. The extent of the sell-off suggested the likelihood of some follow-on downside this week. The problem for the bulls is that they cannot afford to have too many days below the 50 DMA. Support is likely around 9900 but any move below that level would raise some concerns. Last Tuesday s high was a marginally higher high but the market reversed lower by the close. This higher high was therefore not that bullish in technical terms. If we get a bounce this week, I would think that resistance would be near 10,100. An inability to quickly move back above that level would be bearish and could generate more doubts about the rally. If 9900 falls, then 9700 would be the next horizontal support level. The 200 DMA at 9235 looks more doable in the event the retracement lasts a few more weeks. MACD is only now starting a bearish crossover. The August MACD bearish crossover occurred at a time when the pullback was only half over. History may not repeat itself, but this crossover could be an indication of more downside on the way. The weekly Sensex chart shows a possible bearish double top pattern. In the event the August low is violated, the downside target to this pattern would be about 29,700. This target would first require a move below 31,000. A close above last week s high would negate the bearish pattern and would give bulls life once more. Even a major pullback to the 50 WMA would likely not do much technical damage to this strongly up trending market. Meanwhile, ICICI Bank (IBN) broke support last week and closed sharply lower. Further downside could suggest a gap fill which is also near the 200 DMA. After that, reluctant bulls may become more confident about taking long positions. The chart is still basically bullish but is retracing after getting ahead of itself in July. Infosys (INFY) also declined last week as it found interim support at the early September low. This could be a bullish double bottom pattern which may entice more bulls to go long. However, any move below the early Sept low would be bearish and could indicate a quick decline to the August low. This week could see more downside although some up days also look likely. The early week leans more bearish in this respect as Mars opposes Neptune and Mercury squares Saturn. Both of these are bearish aspects. Tuesday s Moon-Saturn conjunction also looks a bit bearish so we could see support tested at 9900 and then some. But a rebound is likely to begin either on Tuesday or Wednesday as Mercury enters Virgo and aligns with Jupiter. Thursday s Jupiter-Uranus opposition may give the bears the advantage at the end of the week. If the midweek gains materialize as expected, then perhaps stocks won t fall too far

6 this week. One scenario would be a hard test of 9900 on Monday followed by a bounce back up to 10,000 or higher. Then the late week could see the Nifty trade at or below its current level of However, I think there is some risk that 9900 will not hold this week, especially early on. The midweek gains look fairly strong but if the declines are big, then we could see the Nifty finish the week below I think it will fall below 9900 soon enough and it could well happen this week. Next week (Oct 2-6) also looks bearish as Venus conjoins Mars late in the week. Some gains are likely early in the week but by Wednesday, the picture looks more bearish. Lower lows are not certain here, but they are still very possible if the early week rebound is weak. The following week (Oct 9-13) looks bearish to start as Saturn aligns with Rahu on the 9th. Mars then squares Saturn on the 10 th and 11 th. Lower lows are very possible here, although the second half of the week could see a bounce. Some strength is likely in mid- October as Jupiter is conjoined first by Mercury and then the Sun. Some kind of technical rebound is therefore likely between Oct 11 th and say, Oct 24 th. Late October looks bearish again as Saturn enters Sagittarius. The first half of November could be bullish but the second half of November and early December looks very bearish. If the October and November rebounds prove to be weak, then it is possible that December and January could bring lower lows. I m not confident in predicting lower lows but certainly they are possible looks fairly bearish, especially the first half of the year. Lower lows are quite possible by June Technical Trends Astrological Indicators Target Range Short term trend is DOWN bearish (confirming) ,000 (1 week ending 29 September) Medium term trend is UP bearish (disconfirming) (1 month ending 29 October) Long term trend is UP bearish (disconfirming) (1 year ending September 2018)

7 Currencies The Dollar edged higher last week after the Fed s somewhat hawkish statement reaffirmed its commitment to raising rates. The USDX finished just under 92 while the Euro settled just under The Yen weakened to 112 and the Rupee slid toward the 65 level. I thought we might have seen more downside last week although the Dollar may be finally showing signs of finding a bottom. Wednesday s high tested resistance at the 20 DMA so it remains to be seen if we will get a real bounce. Nonetheless, the indications are good that the rate of decline has slowed as a falling wedge pattern may be taking shape. These are bullish although it does not preclude a marginally lower low in the near term. Support is near 91 and horizontal resistance is 94. However, Wednesday s rally tested falling channel resistance so any move above that level could be bullish. The weekly Euro chart is showing strong resistance at 1.20 with support at Any move below that level could retest support at That would still be a normal pattern of consolidation after this year s rally. The upside target of 1.25 may only be jeopardy if the Euro slips below Conversely, any move to 1.21 or above would likely pave the way to This equates to about on the USDX. This week looks mixed for the Dollar. The early week has an added risk of some downside on the Mercury-Saturn aspect. A retesting of the low of 91 is possible although I would say not it is probable. But the late week may bring some relief. I m not sure where the Dollar is likely to finish this week. Next week could be more positive as Venus conjoins Mars. I think the Dollar is likely to begin a rebound in October although it could still be subject to choppy price action for some time yet. I would still not completely rule out a quick decline down to 88 for the DX although I think it is more likely that it will hold here at 91. But the Oct to Dec period looks more bullish and offers the possibility of a serious rebound, perhaps back up to the 200 DMA at 98. The Mars-Saturn square on Oct 11 is a date that could produce a big move and is one possible turning point. While Q4 is likely to be bullish for the Dollar, I would expect some significant retracement in Q This is likely to produce a major decline that lasts into May or June. Lower lows are possible although that depends on where the preceding rally tops out. The second half of 2018 should be more bullish. Technical Trends (Dollar) Astrological Indicators Target Range

8 Short term trend is DOWN bearish (confirming) (1 week ending Sep 29) Medium term trend is DOWN bullish (disconfirming) (1 month ending Oct 29) Long term trend is UP bullish (confirming) (1 year ending Sep 2018) Crude oil Crude oil moved higher last week as OPEC deferred a decision on output levels. WTI rose 2% on the week to $50.66 while Brent finished above $56. I had been neutral about last week given the mix of influences in play. The technical outlook seems mixed. The bulls can point to the break out above falling channel resistance but bears will note the inability to move above horizontal resistance in this area. Bulls likely have a more compelling story for now after the move above the 200 DMA and the previous August high, however. The short term outlook will remain bullish as long as WTI remains above $50 and the 200 DMA. The current September up move fulfills the measured move target of $51 so that is another reason why gains may now be harder to come by. The summer rally is still ongoing, however, so any kind of higher low above $47 would be acceptable for bulls. The weekly Brent chart reflects the ongoing rebound as part of a larger rally that has taken place since There is obviously heavy resistance at $56-57 but the move up has been bullish with three straight weekly gains. From a technical perspective, it seems more likely that we should see hesitation and consolidation at this level. This week looks more bearish. The early week looks more bearish than the late week as the Moon conjoins Saturn and Mars opposes Neptune. Some upside is perhaps more likely on Wednesday or Thursday as Mercury aligns with Jupiter. Friday also looks somewhat bearish on the Venus-Neptune alignment. But overall, there is some risk of a decline here so bulls should be cautious. If the early week is bearish as expected, then we could get a test of the 200 DMA. I would not be surprised if it broke below that level also.

9 Next week (Oct 2-6) could see a rebound in the first half of the week but the late week looks more bearish. I am neutral on where this week could finish. The following week (Oct 9-13) looks more bearish as Mars aligns with Saturn. So it still seems likely that the first half of October could have a bearish bias. There is some chance of a rebound in mid-october, probably starting the week of Oct 16 as Mercury conjoins Jupiter. The late October period suggests rising downside risk again as Saturn enters Sagittarius. Depending on the size of the mid-oct bounce, there is a risk of a break below the previous low of $46. November could bring a rebound but there is a mix of negative aspects at that time which could make trade quite choppy. As before, I think the Dec-Jan period leans quite bearish and we could see a retest of $40. Crude looks more likely to build a stronger rally from about February to May or June. Technical Trends Astrological Indicators Target Range (WTI) Short term trend is UP bearish (disconfirming) $48-50 (1 week ending Sep 29) Medium term trend is UP bearish (disconfirming) $44-48 (1 month ending Oct 29) Long term trend is DOWN bullish (disconfirming) $45-60 (1 year ending Sep 2018)

10 Gold Gold extended its slide last week after the Fed delivered a somewhat hawkish statement which asserted its intention to raise rates going forward and to unwind its balance sheet starting in October. Gold lost 2% on the week to While I was uncertain about the impact of the Fed, I thought we could have seen some upside last week. It seems my forecast for a decline in gold has been wide of the mark. Mea culpa. I had thought the decline would be focused closer to the exact Saturn-Lunar Node alignment in early October but it s already well underway. The summer rally into early September has given way to a significant pullback. The failure to hold support 1300 should give bulls pause here. The rally is clearly not as strong as many had hoped as the entire breakout above 1300 has now evaporated. It s possible there could be some narrow range trading here at before bulls try to retest the previous high of But the further below 1300 gold goes, the more prone it will be to deeper retracement. If we do see a bounce here, resistance is initially at and the 20 DMA. This was support on the way up but it may act as resistance now as bulls try to find their game again. This week leans somewhat bearish. The Jupiter- Uranus alignment will begin to separate on Thursday so that could signal some late week declines. The early week is harder to call given the mix of influences in play. It is possible we could see a relief rally on Monday but the midweek looks less positive as the Moon conjoins Saturn. If there is some upside early, I think it likely will be sold either later this week or next week. Generally, I would assume a bearish bias on gold until the week of Oct 9-13 unless or until the technicals prove otherwise. Next week (Oct 2-6) also has some possible negativity from the Venus-Mars conjunction that is closest later in the week. A decline well below 1300 is quite possible here. Some kind of rebound looks likely by mid-october as Mercury and the Sun conjoin Jupiter. I m not sure if this will be strong enough to break the down trend, however. The last week of October could be bearish, however, as Saturn enters Sagittarius. But November should bring some upside and it could be significant. This will likely take it back up above 1300 and possibly to new highs above Let s see. But Dec-Jan still look quite bearish and we could see gold fall sharply again. A return to its previous trading range of is quite possible although lower lows also cannot be ruled out. A strong rally is likely to begin around Feb-Mar and continue into May-June.

11 Technical Trends Astrological Indicators Target Range Short term trend is DOWN bearish (confirming) (1 week ending Sep 29) Medium term trend is UP bearish (disconfirming) (1 month ending Oct 29) Long term trend is DOWN bullish (disconfirming) (1 year ending Sep 2018) Disclaimer: For educational and entertainment 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