30 June 2018 Volume 11, Issue 27

Transcription

1 30 June 2018 Volume 11, Issue 27 Summary for week of 2 July 2018 Stocks could move lower early in the week but likely to rebound after Dollar with bullish bias and may test resistance again this week Crude oil likely to extend gains Gold could bounce this week, especially after Monday US Stocks Stocks generally fell last week as trade uncertainties undermined confidence. The Dow lost more than 1% to 24,271 while the S&P 500 finished at This bearish outcome was in keeping with expectations as I thought the midweek Full Moon would likely bring some declines. As expected, we got a bounce on Thursday although Friday was somewhat more bullish than expected. That said, Friday s close was pretty weak and hinted at more downside next week. Just when we thought that the market had become used to Trump s negotiating tactics on trade, there is more evidence now that a trade war and protectionism may be the ultimate consequences of his policies. The EU and Canada have retaliated on the tariff front, and it seems China is not willing to compromise either. It s too early to know where this will all lead, but there remains a real risk that tariffs are likely to expand this year and that trade will be negatively affected. That, in turn, will tend to raise prices and cause inflationary pressure which will force the Fed to raise rates regardless of growth data. Obviously, a trade deal between the US and China would allay most of those fears and would be bullish for stocks in the short term. For the moment, however, markets are growing impatient with the confusing signals coming out of the White House and the lack of progress on the trade front. The whole issue is definitely a headwind for stocks but whether it can end the bull market remains to be seen.

2 The astrological outlook is improving as we enter the month of July. I had thought that we were likely to form an interim low sometime around the Full Moon and that seems to be the case so far. And yet, there is the risk of further downside this week, especially on Monday and Thursday although I am unclear if they will form lower lows. Perhaps. The next question is what kind of bounce we will see in July: will the SPX move above 2791? It s difficult to say with confidence. Thus far, this year has been following the logic of the lunar phases quite closely. Interim lows are made near the Full Moon with highs near the New Moon. The New Moon in July happens on the 12 th so that is one date to keep in mind. I tend to think stocks may rise past that date, perhaps into the following week of July If we get a low next week near 2676 (near the May 29 th low), then a move above 2791 may be difficult. But a mere retest of 2700 could mean there is enough time in July for the SPX to move above In any event, the late July period does look very bearish given the Full Moon occurs just as the Sun-Mars opposition conjoins the Lunar Nodes. The technical outlook is bearish in the short term but more bullish in the medium term. The indexes appear to have found support near their 50 DMA which suggests the rally can now continue. The higher low on the SPX on Thursday is part of the bullish perspective and argues for at least a quick retest of 2791 and ultimately for new all-time highs. But the technicals are mixed as the SPX is still below its 20 DMA, which often marks a higher risk area. Stochastics are oversold so that could indicate a bounce is coming soon. However, Friday s candle was bearish a black candle with a tall upper wick. These candles are often followed by pullbacks. Also, the SPX rejected resistance twice at 2750 and the 20 DMA. This could mean that bears will try now to retest support at 2700 next week. That could well hold, but there is a chance it could break down to the 200 DMA at 2668 and the rising channel support that dates back to the Trump election in November Depending on where the SPX bottoms next week, the next bounce could either find resistance at the falling trend line from the January high at 2775 or at the rising channel from the April and May high near These should be seen as alternatively bearish and bullish price targets in July. The weekly Dow chart shows a possible bottoming candle this week that tagged the 50 WMA (250 DMA). The Dow has been underperforming the other indexes due to its international trade exposure. This argues for a bounce this week but it s important to note that it has not tested its March high. It is possible that horizontal support at 23,500 may be more important. Bears are no doubt eyeing the bearish crossover in Stochastics which is now below the 80 line. This is a scarier chart now for the medium term as it suggests that any July bounce may be very brief and not very impressive, at least on the Dow. The NASDAQ has fared better although it also printed a black candle on Friday and has not retaken its 20 DMA either. A retest of Thursday s low looks likely with possible lower lows also. The Russell 2000 has been weakening here after outperforming all other major indexes. It also looks likely to retest its 50 DMA next week at least, with a real possibility of testing its key resistance/support line at 1610.

3 This week is tough to call although I would lean bullish overall. Normally the July 4 th holiday week is bullish with light trading volumes. I m less confident of that outcome here since we could see tariff news upend the quiet holiday mood. Monday looks bearish as Mercury aligns with the Lunar Node and Saturn. This looks like a probable decline although I m uncertain how large it could be. A 1% drop is very possible. Tuesday is a shortened trading day which leans more bullish. Mercury will still be in close proximity to the Lunar Node and Saturn but the Moon will align with Jupiter which tends to be bullish. If Monday has been bearish, then Tuesday should see a reversal higher. If Monday has finished green, then it is possible we could see some selling on Tuesday. But that seems less likely. After Wednesday s holiday closing, Thursday is hard to call. On one hand, the Sun- Jupiter-Neptune alignment is very bullish and should see a rebound. However, Mercury opposes Mars on the very same day so I am uncertain where stocks could go. Perhaps it moves in both directions with a bearish gap down open (on the Moon-Saturn square) and then stocks rebound by the close. Friday looks somewhat bullish as Mercury moves past Mars towards Jupiter. One possible scenario next week may be a pullback to on Monday, then a bounce Tuesday followed by a retest of Monday s low on Thursday and then higher into Friday to perhaps Next week (July 9-13) looks more bullish as Jupiter stations direct on Tuesday the 10 th while in alignment with Mercury and Neptune. The early week therefore looks fairly bullish with some selling looking likely on Friday. I would expect a decent bounce here, perhaps back to the 20 DMA at 2755 and even higher. The following week (July 16-20) is harder to call. There is an absence of close short term aspects but I would lean somewhat bullish in any event as Jupiter appears strong here. Saturn and the Lunar Nodes are still powerful but I suspect they will not manifest significantly. Late July is likely to bring another pullback -- perhaps a big one -- as the Full Moon on the 27th aligns with a nasty-looking Sun-Mars opposition. After the first week of August, we should see another rebound but this is likely to last for only a week or two. Late August and September should see another decline. It is hard to predict where stocks will be by September. Higher highs are looking less likely now I must admit. If we get a test of the 200 DMA this week and then another one in late July, the SPX could even fall below the 200 DMA by September. October should see a significant rebound which could carry into early November. Another correction is likely in late November and December. So 2018 could end up being a fairly bearish year. Q looks bullish to begin but Q2 should see a major retracement which could wipe out any preceding gains. The second half of the year looks more bullish, however. Technical Trends Astrological Indicators Target Range Short term trend is DOWN bullish (confirming) SPX

4 (1 week ending July 6) Medium term trend is UP bearish (disconfirming) SPX (1 month ending Aug 6) Long term trend is UP bearish (disconfirming) SPX (1 year ending July 2019) Indian Stocks Stocks fell last week as the rising US Dollar and global trade worries continued to erode sentiment. The Sensex fell by less than 1% to 35,423 while the Nifty finished at 10,714. This bearish outcome was in keeping with expectations as I thought that Thursday s Full Moon could mark some selling. As it turned out, the low for the week occurred on Thursday and Friday saw a bounce as expected. That said, the selling was still quite modest as I thought we could see the bears gain more strength. However, bulls held up fairly well considering and stocks remain in pretty good shape. The market is attempting to deal with major uncertainties surrounding the global trade regime. Trump is not only threatening to impose tariffs on most of the US trading partners, but he may also push to remove the US from the WTO. Such a move would prove very bearish in the short term and would no doubt affect India. The problem with tariffs is essentially two-fold: not only do they act as a drag on economic growth as exports decline, but they are inflationary as the cost of imports rise and inefficient and more costly domestic producers take up the slack. More inflation is the last thing India needs at the moment as it is already contending with sharply rising oil prices and a rising US Dollar. Equities will find firmer ground if and when a trade deal is struck between the US and China and oil prices pull back. Until that time, there could be difficulty justifying current valuation levels. The astrological outlook for July looks moderately bullish. With the Full Moon in the rear view mirror, there are improved prospects for higher prices over the next week or two, or at least until the New Moon on 12 July. But the other key factors in play are the bullish Jupiter-Neptune alignment and the bearish Saturn-Rahu alignment. As

5 I have noted previously, these may push and pull sentiment over the next two months or so. My expectation is that Jupiter-Neptune will have a better opportunity to take prices higher in July, especially around the time that Jupiter ends its retrograde cycle and goes direct on 10 th July. To be sure, we could see some more short term volatility this week upcoming, but the likelihood of a rebound afterwards is fairly high. But the rebound may only last two weeks or so as the Full Moon on 27 July looks very bearish. Full Moons are often bearish anyway, but this one is more potent due to its exact alignment with a Sun-Mars opposition. It suggests that the next pullback may be at least as large as what we have seen the second half of June and quite possibly more. The technical outlook is still bullish although now with some caveats. Despite last week s pullback, the bulls managed to put in a higher low at 10,557 and thus kept the upward momentum intact. However, bears did some damage as the rising trend line support off the March low was broken. Friday s bounce was strong but did not close above the 20 DMA. The 20 DMA is a key short term dividing line between an uptrending or downtrending market. If we get more upside this week, then bulls will need a close above that line at 10,745. Interestingly, this is also the approximate level of a back test of the rising trend line as support could turn into resistance. If there is a rejection of that level, then we could quickly retest Thursday s low. In addition, we should note the potential resistance of the falling trend line off the January high which comes in near 10,850. Stocks would become more bullish if that level was broken to the upside. Conversely, the technicals would become more bearish if the 200 DMA is broken. This matches the previous low of 10,430 so there could be a magnetic pull on price to that level. However, it seems more likely that any initial decline to the 200 DMA would be bought fairly aggressively so a breakdown seems unlikely at first. Any subsequent bounce off the 200 DMA would be carefully monitored for size and speed. A weak bounce would likely be shorted, while a stronger bounce could resume the rally towards the ATH. The weekly Sensex chart still looks quite bullish over the medium term. While the daily Nifty chart looks a bit vulnerable, the weekly Sensex chart shows a series of bullish candles with long lower shadows. Certainly, there is resistance at 36,000 which could prove to be formidable but there is no obvious case for a major correction just yet. Stochastics is overbought and above the 80 line. This could still allow for more upside although there is some risk of a bearish crossover in the works here. A move below the 80 line would be a more bearish development. Meanwhile, the falling Rupee boosted the IT sector as Infosys (INFY) moved to new all-time highs. Based on the cup-and-handle pattern price target of $20.20 (USD), there is still the potential for 5-6% upside. An even higher longer term target would be $23.50 based on the rounded bottoming pattern from HDFC Bank (HDB) moved lower last week as investors took profits. The chart may be forming another bull flag here so the downside is entirely in keeping with a strongly bullish up move. The chart would only become bearish if there was a close below Thursday s low. A retest of January s high looks fairly likely eventually.

6 This week looks choppy. The early week leans bearish, however, as the Mercury-Rahu conjunction could manifest on either Monday or Tuesday. Tuesday morning looks more bearish, however, as the Moon is aspected by Saturn. Perhaps we will see a bullish open on Monday but then more weakness in the afternoon. Tuesday could start in the red and then perhaps recover later. Wednesday looks more bullish as the Moon aligns with the Sun and Jupiter, especially in the morning. I am uncertain where stocks may close Wednesday, however. Thursday has some downside risk as Mercury opposes Mars. This is more bearish in the afternoon so it is possible we could see a positive open Thursday which is then sold once Europe begins trading. Friday looks more bullish. I would keep an open mind about where the indices may finish this week. There is still some risk of some downside which could retest Thursdays low at least. This is more likely to occur on Monday or Tuesday. It is also very possible that the Nifty could fall below that level as well. Even if we get a bounce late on Tuesday or Wednesday, the likelihood of another red day on Thursday (?) means that stocks could be struggling. Even if Friday is green, it is hard to say if that will be enough for a green week. My bias would be slightly bullish though. Next week (July 9-13) looks more bullish. The first half of the week looks bullish as Mercury aligns with Jupiter. Jupiter stations direct early on Wednesday and should give buyers the advantage into midweek. Wednesday afternoon could bring weakness with some declines possible until Thursday morning. Maybe there will be a rebound by Friday. The following week (July 16-20) looks more mixed with some declines likely early in the week. While another push higher is possible by the end of the week, I suspect the upside may be limited. After that, July will become more bearish as Mars conjoins Ketu and then opposes the Sun on July A deep decline is possible on this unusual alignment and then we get the often volatile Full Moon just two days later on the 27 th. We could see a 3-5% decline during that week. The astrological outlook improves after the Mars- Uranus square on 4 th August. August should therefore generate some upside which could well revive the rally. But September looks bearish as Saturn ends its retrograde cycle on the 6 th and aligns more closely with Rahu and Mercury. This September pullback does not look too strong, however, so most of the gains of August may well stand. Late September and early October should see further upside but the rally will start of fizzle in the second half of October. A correction looks likely between October and December. Q should be more bullish and could see a sharp rebound. Q is more bearish again with a possible low occurring in May. The rest of 2019 could see a more bullish trend. Technical Trends Astrological Indicators Target Range Short term trend is DOWN bullish (disconfirming) 10,500-10,800 (1 week ending 6 July)

7 Medium term trend is UP bearish (disconfirming) 10,000-10,500 (1 month ending 6 Aug) Long term trend is UP bullish (confirming) ,500 (1 year ending July 2019) Currencies The Dollar finished the week slightly higher as trade woes remained a potential headwind and GDP data was weaker than expected. The USDX ended the week at while the Euro settled Friday just under The Yen touched the 110 level and the Rupee Index fell to 69. This neutral Dollar outcome was more or less in line with expectations as I thought we would have a choppy week. The low for the week arrived on Tuesday just below 94 while the Full Moon coincided with a bounce that eventually tested resistance at 95. The Dollar rally is looking tired at this point although it remains above its 20 DMA. Recent highs have been only marginally higher above the 95 level and we are seeing the formation of a bearish rising wedge pattern. If the pattern continues, we could see 96 this week but the Dollar would become prone to sharper pullbacks. 95 is key horizontal resistance that dates back to November In that sense, Dollar bulls should see this pause in the rally as quite normal as profit taking prevails. At this point, key support is likely near 93 and the 50 DMA. The early June low of 93 should not be breached if the rally is going to begin a new leg higher. A close below 93 would signal that this normal consolidation is evolving into something larger and less bullish. Conversely, a close above 95.5 could signal the beginning of a new leg higher. If the Dollar moves above 95.5 then the measured move upside target (88 to 95; 93 to 99) would be in the 99 area. The weekly Euro chart is still keeping hopes alive for a significant bounce here as the possible head and shoulders pattern develops. A weekly close above 1.18 would be the critical first step towards the right shoulder formation with a target of As an added impetus perhaps, that is the level where the 20 and 50 WMA are currently converging. Alternatively, a close below 1.15 would likely invalidate the head and shoulders pattern and would signal a more immediate move lower.

8 This week could see further upside for the Dollar. Gains could come as early as Monday although Tuesday s Moon-Sun-Jupiter alignment looks more bullish. A retest of resistance 95 is quite possible and a late week move above resistance is also worth considering. Friday could see a pullback. Generally speaking, I think the Dollar is likely to keep rising in July. Therefore, the possibility of the head and shoulders on the Euro playing out seems less likely. We shall see. I would also think that further gains are possible next week (July 9-13) and indeed the rest of July leans bullish. The rally could even extend into early August. It is difficult to estimate targets but 99 would not surprise me. August as a whole may bring some retracement although it does not look overly large. September looks more bearish still with a retracement likely extending into October. This is unlikely to disrupt the rally, however. Another push higher should begin in November and December. The first half of 2019 leans bullish with a possible interim high in Q2. The second half of 2019 looks more bearish. Technical Trends (Dollar) Astrological Indicators Target Range Short term trend is UP bullish (confirming) (1 week ending July 6) Medium term trend is UP bullish (confirming) (1 month ending Aug 6) Long term trend is DOWN bullish (disconfirming) (1 year ending July 2019) Crude oil Crude oil surged higher last week on supply concerns and declining stockpiles. WTI jumped 8% to $74 while Brent rose to $79. This bullish outcome was expected, although the size of the move was surprising. I thought oil might have been susceptible to a midweek pullback although I was unclear what effect the Full Moon might have. Nonetheless, the bullish outcome was in keeping with my general bullish bias for the rally to continue here. The technicals look bullish to be sure, as WTI has made a new high for the year. However, it is also at resistance at the top of the rising channel. While it could move higher in an overthrow, the immediate upside looks more limited. Some consolidation of recent gains looks more likely in the near term. Support is now $72 which

9 matches the May high. If $72 breaks, then a retest of the 50 DMA at $68-69 looks likely. The long term up trend looks healthy after the rebound from its retracement to $64. The weekly Brent chart is also at resistance although interestingly it is horizontal resistance last week s close matched its May high. While we could see some consolidation at this level in the coming days, the chart is still very bullish. Over the past two years, each pullback has been higher than previous resistance. Price has been following a rising channel very consistently and makes a compelling case for higher highs. The measured move upside target now is $88. The 20 WMA at $72 is now acting as support so pullbacks will likely be bought fairly aggressively. The chart would become less bullish if channel support was broken and Brent posted a lower high or lower low. That still seems to be some ways off yet, however. This week could see further upside. Monday could go either way but Tuesday looks more bullish on the Moon-Sun-Jupiter alignment. Thursday s Moon-Saturn square could be bearish but Friday s Sun-Jupiter alignment argues for more upside. While I would not rule out some pullbacks here, the planets do not offer much evidence for any major selling. In fact, they suggest the rally may well push to new highs. Generally, I think the up trend will likely continue until the end of July at least. Smaller pullbacks are still likely but the overall up trend should continue. Next week (July 9-13) could also be positive although gains may be moderate. Wednesday and Friday lean a bit bearish due to negative Moon placements and this could undermine the overall rally to a limited extent. The following week looks more mixed as Mars conjoins the South Lunar Node (Ketu). There is a rising downside risk of larger declines here although that risk is due to rise further towards the end of the month. The last week of July will have a potent Full Moon which looks likely to inflict some technical damage on prices. I am uncertain if the decline will be large enough to break the rising channel support. It s possible but it s hard to say. August will likely bring a rebound although it may be fairly weak and brief. A lower high is a real possibility in August which could then set the stage for another retracement that I can see occurring in September. September looks more bearish and could again test channel support at least. A sharper pullback is likely in late October and early November. This could again challenge key support although I am reluctant to predict a major technical breakdown of the bull market. The first half of 2019 looks generally bullish although the correction in July 2019 could shake things up significantly. The second half of the year therefore looks more bearish. Technical Trends Astrological Indicators Target Range (WTI) Short term trend is UP bullish (confirming) $70-78 (1 week ending 6 July) Medium term trend is UP bearish (disconfirming) $65-70 (1 month ending 6 August) Long term trend is UP bullish (confirming) $70-85 (1 year ending July 2019)

10 Gold Gold declined yet again last week as trade war concerns diminished growth forecasts. Gold fell by more than 1% to This bearish outcome was not surprising as I thought the midweek Full Moon could correlate with some downside. I thought there was a chance for a reversal higher at that time, although the low occurred on Thursday. As expected, we did get a bounce on Friday on the Venus influence. With the Full Moon and the Sun-Saturn opposition now behind us, is it possible that gold could rally now? Well, at least the prospects for a rebound are better than they were last week, even if they are not really that bullish yet. The technicals look oversold here and do argue for a bounce of some kind. The measured move target to 1260 has been fulfilled and now only the long term rising trend line support to about 1240 is left to be tested. This corresponds with the 200-week moving average. Given how bearish sentiment is at the moment, it may require a hard test of that rising trend line and perhaps even have some brief spikes below it. But there is a plausible technical case for buyers to step in soon. Perhaps it will take a decline down to the late 2017 low of 1238 to induce more buying. Clearly, the bullish technical case for gold is reaching a make-or-break point here. If 1240 cannot hold as a weekly close, then it is possible gold could fall sharply below Alternatively, if support does hold here at , then resistance would be near the 20 DMA now at This is also the level of the May lows before the breakdown and an instance of support turning into resistance. If gold can recapture 1290 then there will be better case that a bottom is in and the rally can resume in some form. This week could see a bounce. The early week may see some additional downside as Monday s Mercury-Lunar Node conjunction looks bearish. However, Tuesday tilts bullish on the Moon-Jupiter alignment so we may see buyers energized once again. Wednesday is closed for the US holiday but Thursday and Friday also offer further hope to bulls as the Sun aligns with Jupiter. Depending on how much of a dip we may see Monday, I would think the chances are fairly good for a positive week overall. Next week (July 9-13) looks mixed. The early week Mercury-Jupiter alignment could see more gains and perhaps even a retest of resistance at the 20 DMA or even The late week Sun-Pluto opposition leans bearish, however, so it is unclear if the post-full Moon bounce can continue. The following week (July 16-20) looks more bearish as the Sun moves into alignment with Mars. The next Full Moon on July 27 th looks bearish since it will align exactly with Mars. If early July has brought a technical bounce off support, then late July looks like we could see a retest of support at 1240 or so. I am unsure if this support will hold. The Mars Full Moon looks bearish but it is difficult to predict how bearish it will be. In any event, August should bring about some kind of bounce as Jupiter aspects Neptune but it may not be much more than a technical oversold bounce. September

11 looks bearish again as Saturn stations direct and will align with Mars, Uranus and the Lunar Nodes. It is possible this could produce a lower low and break key support. A stronger rebound is likely in October and November but this likely will not climb back up to Depending on how much damage we see by September, it is possible this may only retest previous support at More downside is likely in late November and December with the first half of 2019 looking mixed at best with another correction likely in Q2, possibly to lower lows. The second half of 2019 may be more bullish. Technical Trends Astrological Indicators Target Range Short term trend is DOWN bullish (disconfirming) (1 week ending July 6) Medium term trend is DOWN bearish (confirming) (1 month ending August 6) Long term trend is DOWN bearish (confirming) (1 year ending July 2019) 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