29 July 2017 Volume 10, Issue 31

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1 29 July 2017 Volume 10, Issue 31 Summary for week of 31 July 2017 Stocks mixed with slight bullish bias this week Dollar likely to trend lower before late week recovery Crude oil should extend gains this week Gold likely to rise further, especially in second half of week US Stocks Stocks were mixed last week as Friday s GDP data showed only continued modest growth. The Dow outperformed the broader markets, however, rising more than 1% to 21,830 while the S&P 500 finished unchanged at This neutral outcome was somewhat disappointing as I thought we might have seen some downside, especially in the early week. As it happened, the late week proved to be somewhat bearish. Markets remain on autopilot it seems as investors continue to buy the dips no matter how small. The Fed avoided upsetting the apple cart last week as they did not announce any unwinding of their QE balance sheet. Yellen s statement hinted that the announcement of its sale of assets would be at the next meeting on September 20. That bought enough time for the market to remain on cruise control a while longer. Not even the failure of the GOP repeal of Obamacare on Friday was enough to shake things up. And yet as the indexes continue to inch higher, we are seeing a greater number of articles in the media about dangerous levels of complacency and an inevitable correction just around the corner. There is good reason to be skeptical about these sorts of warnings since one can often find them during a maturing bull market. Bulls would insist they may even be contrarian indicators of more upside. But the planets are still signaling a larger pullback starting in August which could well morph into a full-blown correction in September. There are several negative factors in play during this two-month window which should

2 be able to produce a pullback that tests the 200 DMA at That s not saying much, however, as it would only represent a 6% pullback. But it would at least introduce some instability into the market which could open up the possibility of more declines. I m still uncertain if the market could then rally again to higher highs in Q4 or even in the first half of It s possible as there are indications for a significant rebound once we get through this volatile period. The technical outlook is still bullish. Thursday s higher high of 2484 suggested that the bulls could well be able to reach 2500 in the near term. Channel resistance is now near 2540 in the event of a stronger push higher. Channel support off the 2016 low is near 2340 which just happens to be very close to the 200 DMA at The convergence of those two factors may increase the likelihood of a test there in the coming weeks. More immediate support may be closer to the 50 DMA now at We have seen several pullbacks to this level during the course of the Trump rally and further similar declines would not be surprising. But given the difficult astrological influences here, I would think any initial pullback to the 50 DMA is less likely to produce a significant rebound. It seems more likely to begin the two-stage process of a larger decline where the bounce after the initial sell-off is weak and produces a lower high and this then lays the groundwork for a second steeper decline. As I noted last week, other indexes are looking weaker as the Nasdaq posted a slightly negative week overall after Amazon s earnings disappointment. The German DAX also fell to lower lows as the rally is again showing signs of narrowing breadth where speculative capital is pushed into a smaller number of stocks. The weakening breadth is also seen in last week s bearish crossover of the 5/10 EMA in the Bullish Percent chart. While we could yet see a bounce in this indicator, the fact that it did not match the neutral outcome in the SPX is a warning that the rally needs wider participation soon or else the correction may begin for real. The weekly Dow chart is very overbought here with RSI way over 70. No matter how reliable the Yellen put may be for lifting asset prices, the chart suggests this is a not an attractive entry price for investors seeking longer term gains. Bond yields posted another gain last week despite Friday s dip after the weaker than expected GDP print. Are we finally at a key inflection point where yields begin to rise more consistently? Certainly, the 200 DMA appears to be acting as support at the moment. It remains to be seen if 10-year yields will retest recent lows at 2.1%. A double bottom would perhaps be a more reliable place from which yields could undergo a more sustained rise. Rising yields are compatible with higher stock prices as long as earnings continue to rise. But if yields rise quickly while earnings are lackluster, then there could be problems for the stock market.

3 This week looks mixed and uncertain. Bulls may enjoy some benefit from the approaching Jupiter- Pluto alignment that is exact on Friday, Aug 4. The week as a whole could therefore have some bullish protection against worsening declines. That said, there are a couple of short term bearish alignments that should produce at least two down days this week. Monday s Mars-Mercury-Saturn alignment looks tense and seems incompatible with another boring day of modest gains. Some downside is possible to start the week. Some upside looks more likely midweek as Venus aligns with Jupiter and Pluto on Tuesday and Wednesday. Higher highs are conceivable due to this pattern. The late week looks more difficult as Mercury and Mars align with the Lunar Nodes on Thursday and Friday. The takeaway here could be that this week s Jupiter aspect is the last one for a while so that could mean there is less bullish sentiment available. I am agnostic on where stocks could finish this week. A significantly higher high seems unlikely given the presence of the negative alignments, however. Next week (August 7-11) looks more bearish on Monday s lunar eclipse. While eclipses do not have a solid track record for foretelling declines, this particular eclipse occurs opposite Mars. This introduces an added element of disruption and uncertainty into the picture. The midweek could see some upside but the late week looks vulnerable to declines again. The following week (Aug 14-18) could see a bounce in the first half of the week as Venus aligns with Jupiter and Pluto, but the late week could offset those potential gains. I would lean more bearish here overall. The second half of August is a more difficult period as the solar eclipse on Aug 21 is likely to coincide with declines. Again, the eclipse itself is only slightly disruptive of the status quo but not all eclipses are equal in their effects. It s the ongoing proximity of Mars which is likely to create problems for sentiment. Conflict, disputes and violence in global affairs are more likely during this late August early September period. They may act as a catalyst for the pullback I am expecting. The down trend should extend well into September. A test of the 200 DMA looks very doable and I would not rule out a full blown 10% correction down to October should bring a rebound as Jupiter enters Libra. The rebound could run out of steam in November with another move lower likely to begin in December and extend into January. Lower lows are definitely possible in Q although I m not confident yet in saying they are probable. Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) SPX (1 week ending August 4) Medium term trend is UP bearish (disconfirming) SPX

4 (1 month ending Sep 4) Long term trend is UP bearish (disconfirming) SPX (1 year ending August 2018) Indian Stocks Stocks pushed higher again last week on favourable monsoon indications, positive earnings and bullish global cues. The Sensex was higher by more than 1% to 32,309 while the Nifty broke above the psychological level of 10,000 finishing at 10,014. This bullish outcome was unexpected as I thought the late week would be more bearish than it was. While stocks did decline on Thursday and Friday, the downside was very small and not big enough to offset the preceding upside. The rally remains as bullet-proof as ever. Investors are anticipating strong growth in the next several quarters as the RBI is poised to cut rates at its next statement on 2 nd August following lower inflation data. Lower rates are expected to spur more investment which is likely to translate into higher profits. The falling US Dollar is also boosting emerging market sentiment as FII again go out in search of higher yields. The nascent recovery in Europe also seems to be taking hold and this is also seen as a net positive for India as exports are likely to rise. No matter how technically overbought the market may be at the moment, the long term outlook is still bullish. This is the main reason why dip buyers are being rewarded with a succession of higher highs. Even if stocks suffer some kind of correction, most traders would see it as a buying opportunity to buy stocks at a discount.

5 While I was mistaken in thinking stocks could slip last week, the higher high was not wholly unexpected. I have previously noted that the bullish Jupiter-Pluto alignment in early August could coincide with gains. The higher highs are therefore not unexpected for the month August although time will grow short for this current up move as we enter the eclipse period from 7 th August to 21 st August. Eclipses are traditionally seen as harbingers of change and disruption although they do not always correlate with volatility in the markets. In that sense, they are only a weakly bearish influence. However, this upcoming eclipse period may be more bearish due to the proximity of Mars to the Sun on the 7 th Aug lunar eclipse and then to Rahu for the 21 st Aug solar eclipse. Both are bearish influences which should load the cosmic dice in favour of the bears for the overall month of August. The technical outlook is clearly bullish for the long term. The higher highs are also bullish but with the Nifty reaching 10K, many analysts are expecting some consolidation. This is perhaps more likely if there is a move back below support at 10,000 which seems inevitable anyway. Immediate support would be close to the 20 DMA and Thursday s candle looked like a possible reversal as the highs did not hold by the close. Besides hitting round number resistance, Thursday s high also tested channel resistance at 10,100. Some consolidation would therefore not be unexpected in this situation. Key channel support is near the 50 DMA at Any move below that line would signify a break with the general pattern of the 2017 up trend. That would likely mark the beginning of a new phase in the bull market, one that is more likely characterized by higher volatility and increased risk of a correction. Daily stochastics are still above the 80 line but may soon cross that line in a bearish crossover. That would be a short term sell signal. Even strongly uptrending bull markets have periodic retracements down to their 200 DMA. Eventually, the Nifty should return to this line at 8937 although there is no necessary time frame when it is more likely to occur from a purely technical perspective. The weekly BSE chart also depicts the relentless bull market which is overbought as well. With the measured move upside target now essentially fulfilled, bulls will find it more difficult to push significantly higher. Indeed, last week s candle has a long upper shadow which can sometimes indicate an end to a rally. A similar candlestick can be seen at the end of the 2016 rally which topped out in early September. Bank stocks extended their powerful rally as HDFC Bank pushed to new highs. While it is hard to argue with this kind of upward momentum, the chart is looking increasingly parabolic and will have to fall back down to earth, or least to its 200 DMA. The chart looks too stretched right here. Tata Motors (TTM) suffered heavy losses last week and is approaching key long term support. The stock is currently trading near the convergence of its 20, 50 and 200 WMA so there is an added urgency for bulls to defend the June low no matter what. A move below the June low could be very bearish and the descending triangle pattern could then become a self-fulfilling prophecy. The downside target of this pattern would be approximately near the February 2016 low.

6 This week looks mixed with moves likely in both directions. I had previously thought we could see more upside this week on the strength of the Jupiter-Pluto aspect which is exact on Friday, 4 Aug. However, last week may well have manifested some of that upside so there could be less available this week. The early week leans a bit bearish as Mercury aligns with Mars and Saturn. Monday would seem to be more bearish than Tuesday in that respect. There may not be enough negative energy to test 9850, but a move below 10,000 looks fairly likely. The midweek could see a rebound and higher highs cannot be ruled out. That said, I would not say they are likely either. If we do see higher highs, they are likely to hold by Friday due to a bearish alignment on that day. I am neutral on the week as a whole and would not rule out gains or losses. However, given the mix of influences it looks more likely that they are unlikely to be very large. Next week (Aug 7-11) starts off with a lunar eclipse on Monday after the close. This looks quite bearish and seems likely to correlate with some downside. The decline may bleed into Tuesday. There is an elevated risk of a larger than normal loss here (>1%). A rebound is likely to follow, however, as the Sun aligns with Jupiter on Thursday. Friday is harder to call and could go either way. I would lean a bit bullish, however, in the aftermath of the Jupiter alignment with the Sun. Depending on how the preceding week goes, it is possible we could see a higher high during this week. However, bulls should not be complacent as August as a whole has an increased downside risk. The following week (Aug 14-18) looks bearish to start as Mars aligns with the Moon and Venus. After Tuesday s holiday closing, we could see another rally attempt as Venus aligns with Jupiter. But by the solar eclipse of 21 st August, there will be increasing downside risk. The Saturn direct station on 25 th August also could play a pivotal role in marking the pullback. The period of highest downside risk extends into mid-september. A rebound is likely to begin in September and continue into October and perhaps November. Higher highs are possible in Q4 although I am reluctant to call them probable. Another significant correction is likely to begin in December and extend into early Lower lows are possible here looks more bearish than 2017 so higher highs seem somewhat less likely. Technical Trends Astrological Indicators Target Range Short term trend is UP bearish (disconfirming) ,000 (1 week ending 4 August) Medium term trend is UP bearish (disconfirming) (1 month ending 4 September)

7 Long term trend is UP bearish (disconfirming) (1 year ending August 2018) Currencies The Dollar took it on the chin again last week as Friday s tepid GDP data did little to inspire buyers. The Dollar finished just above 93 while the Euro pushed higher to 117. The Yen strengthened to 110 while the Rupee remained fairly steady above 64. I had been uncertain about the greenback last week as I noted some weak aspects which could further postpone a rebound. That was certainly the case as the Dollar chart is still carving out a clear falling channel. There is a lot of horizontal support at but so far buyers have been reluctant to step in to catch the proverbial falling knife. With Europe showing more signs of growth, the interest rate advantage the Dollar has enjoyed over the past two years is evaporating. The Fed may continue to tighten but now so is the ECB. Resistance is likely near the 20 DMA now at 95. Any bounces to that level would likely be sold by weak bulls anxious to take profits just in case the rebound turns out to be a typical oversold bounce. While there are technical reasons to expect the Dollar correction to end soon as it approaches long term support, the Euro appears to be on its way to higher levels after finally breaking above resistance at It will be interesting to see how these two contradictory trends finally resolve. The measured move upside target for the Euro is 1.25 which would translate into on the USDX. I can t quite see that happening, although I have so far underestimated the depth of this correction. This week could see more downside, especially in the first half of the week. We could see 92 by Tuesday although I would think a recovery is likely by Wednesday. While the week may end neutral, I would not expect a significantly negative week here. Next week (Aug 7-11) could see some weakness in the early week but a rebound is more likely later. The week as a whole leans bullish. The Dollar looks likely to strengthen in the middle of August. A stronger rally is likely to begin in late August around the solar eclipse. This should at least test the 50 DMA (now at 96). Previously, I thought the rally would extend through September and into the fall but now I m uncertain about September. There are some bearish patterns here which may be some significant consolidation after a bounce. September could be bearish, so a retest of the July-August low is possible. Nonetheless, I would expect the Dollar to rally in Q4, and it should recapture its 200 DMA at least. A major correction is likely to begin in Q1

8 2018 and may involve a retesting of the Q low. A significant low in the Dollar looks likely in April-May The second half of 2018 should be more bullish, however. Technical Trends (Dollar) Astrological Indicators Target Range Short term trend is DOWN bearish (confirming) (1 week ending August 4) Medium term trend is DOWN bullish (disconfirming) (1 month ending Sep 4) Long term trend is UP bearish (disconfirming) (1 year ending July 2018) Crude oil Crude oil surged last week on reduced US supply and a Saudi promise to cut production. WTI jumped 8% closing just below $50 while Brent finished above $52. This outcome was surprising as I thought the early week would be more bearish. While I thought crude would likely enjoy a rise in early August, I did not expect it to happen last week. So my prediction for a retest of resistance at the 200 DMA now seems overly cautious. WTI is there already and August has yet to begin. Interestingly, the rebound stopped just at falling trend line resistance as measured from the February high. A further push above $50 would be another bullish signal. Some consolidation is likely near current levels after this sharp rebound, however. Key support is likely near $48 which is the previous high. A move below $48 may indicate a longer period of consolidation. The convergence of the 20 and 50 DMA at is another possible downside target for a pullback. It would constitute a higher low, of course, which would be bullish. The weekly Brent chart is slowly improving also after the move above the 20 and 50 WMA. Clearly, there is still a lot of overhead resistance on the way back up to $57.

9 This week looks bullish enough to bring more upside. The early week could be somewhat bearish but I would not expect declines to be large. Wednesday and Thursday look more bullish and may be seen as having a higher probability of upside. Friday s exact Jupiter-Pluto alignment should be generally helpful this week. I think the chances of a close over $50 are good. How much over is harder to say. We could even see a quick move over $52. More upside is likely next week (Aug 7-11) as the Sun aligns with Jupiter. Monday is something of a question mark with some possible downside risk given the lunar eclipse. A sharp sell-off at that time is somewhat more likely. But I would expect higher highs by the end of the week. More upside is also possible during the week of Aug as Venus aligns with Jupiter. Bulls should be cautious here as downside risk may increase as we enter the second half of August. Late August and early September should bring a sizeable pullback. Previously, I thought a retest of the low of $42 was possible. However, if the current rally climbs well above $50, then the pullback may form a higher low. September looks mixed and should bring some upside. However, it may take a couple of weeks for a new rally to get going. Q4 looks bullish overall, with October and early November looking like the most bullish time window. Higher highs are very possible in Q4. December through February 2018 should see a significant correction although I am uncertain where the interim lows may be relative to previous lows of $ Technical Trends Astrological Indicators Target Range (WTI) Short term trend is UP bullish (confirming) $50-52 (1 week ending August 4) Medium term trend is UP bearish (disconfirming) $42-46 (1 month ending Sep 4) Long term trend is DOWN bullish (disconfirming) $45-60 (1 year ending August 2018)

10 Gold Gold pushed higher last week as the Fed did not announce any unwinding of its QE assets and this hastened the decline in the US Dollar. Gold rose by almost 2% to This bullish outcome was somewhat surprising as I thought gold might be vulnerable to profit taking last week. While I was correct in thinking the early week would be bearish, I underestimated the strength of the midweek rally. I was also mistaken in thinking the late week might see some downside. My prediction for more upside into August has arrived somewhat ahead of schedule here. The gold chart appears to be sticking closely to its previous patterns as each test of support near is followed by a sharp rally towards resistance at Is there any technical reason to think that gold can push above 1300 this time around? Not that I can see, although at least the 20 and 50 DMA are now above the 200 DMA. This is a slightly bullish indication for gold and could be seen as part of a basing pattern which is starting to pick up steam. Bears may still rely on the recent pattern to asset itself once again as shorts may be waiting in the weeds around the 1300 level. There should be some support at the level in the event of a pullback this week. Any move below 1250 would be more bearish and could cause weak bulls to abandon their long positions. But unless the Dollar stops its decline soon, gold bulls will gain more confidence. This week also leans bullish as Jupiter aligns with Pluto late in the week. Monday looks somewhat bearish but it is not a high probability outcome. The midweek and late week look more bullish with Friday s Moon-Venus alignment suggesting some upside. Even if the early week sees a retracement down to 1250 or 1260, there may be enough positive energy here to make higher highs, perhaps above Next week (Aug 7-11) looks mixed with early week gains possible but with increasing downside risk. Monday s lunar eclipse is hard to call as volatility could increase. However, I m not convinced it will produce a decline. The late week looks somewhat bullish as Mercury aligns with Venus. Higher highs are definitely possible here, and 1300 would not surprise me. But the following week looks more risky for the bulls as Mars aligns with Venus on Aug 14 and the Sun conjoins the North Node on the 17 th. Late August looks more bearish and early September also looks difficult. A test of 1200 is very possible by September, and lower lows also cannot be ruled out. A rebound should begin sometime in late September or early October. Gold looks more bullish in Q4 although the rally will likely end by December. After some weakness in the first half of 2018, gold should be more bullish by the second half.

11 Technical Trends Astrological Indicators Target Range Short term trend is UP bullish (confirming) (1 week ending Aug 4) Medium term trend is UP bearish (disconfirming) (1 month ending Sep 4) Long term trend is DOWN bullish (disconfirming) (1 year ending August 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