29 October 2016

Volume 9, Issue 44

Summary for week of 31 October 2016 • • • •

Stocks lean bearish this week although gains more likely late Dollar could test support at 98 by late week Crude oil prone to declines especially in first half Gold more vulnerable to declines this week

US Stocks Stocks slipped a bit last week as odds of a Fed rate hike increased further on improving data. The Dow was actually fractionally higher on the week at 18,161 while the S&P 500 finished at 2126. This modestly bearish outcome was in keeping with expectations as the late week Mars alignment coincided with some downside. As expected, the early week was more bullish, although Monday turned out to be the only positive session this week. The indexes are sitting on key support here just as we head into November and the US election. Friday’s revelation that the FBI is again scrutinizing Hillary Clinton’s emails added an air on uncertainty in the market. So far, it seems the FBI does not have any firm evidence of wrongdoing so the damage may be in the form of optics only. But it seems likely to tighten the race as we get closer to November 8th. The market expects Clinton to win and does not want a Trump presidency. If there is a significant shift in the polls in the coming days towards Trump, the market will sell-off. I think some declines are likely in early November in any event, although I am still expecting Clinton to win the election. For what it’s worth, Trump’s horoscope looks more stressed this week upcoming so he could find himself on the defensive once again. The market is still on track to undergo a decline in November. I am still expecting most of the decline to be concentrated in the first half of the month. While a significant move lower is likely over the next few months, I

would be surprised if we saw much immediate damage in November. It now looks more likely to be the first leg lower which will find support somewhere in the 2000-2050 area. Late November and December looks more bullish as Jupiter aligns with Pluto and Uranus. I am open-minded about how high the rebound could go in December. For the bears to gain conviction, it ideally should be a lower high which is then sold more heavily. As before, I think the planetary picture darkens as we move into mid and late December and this should continue into January 2017. My view is that 2017 should finally mark the end of this bull market with significant declines likely. It would seem it’s all about support at 2120. Friday’s low tested that key level again after Monday’s lower high gave the bears a little more encouragement that they might be on the right side of the trade. A descending triangle pattern is forming as we have had a series of lower highs which have followed resistance at the 50 DMA. If 20120 is broken, there will added impetus for stocks to fall to the target area of 2050-2060. This would be a bit below the 200 DMA and so would parallel the June test. Descending triangles are not guaranteed to pan out, however, and we also could see only a marginally lower low (2100?) before bulls again bid up prices. A gradually falling channel therefore could be alternate technical scenario for the main indexes. The market does seem to be weakening recently as the number of stocks above their 200 DMA continues to decline. This is showing a clear negative divergence with respect to the SPX as it is now below its own 200 DMA. Also we can see that only 60% of stocks are above their 200 DMA compared with 70% in early September. And yet the SPX remains at the same level of 2120 thus indicating a narrowing in the participation of the rally. The weekly Dow chart still shows bearish crossovers in MACD and stochastics. Stochastics has further to fall before becoming oversold. This could favor more downside in the near term before it falls below the 20 line. After such time, short positions would become more speculative. Another tag of the 50 WMA is very possible in November although we should not rule out a quick trip down to the 200 WMA at 16,724. I would not say that this kind of larger decline is probable in the coming weeks, however. Meanwhile, bond yields jumped last week on improving data and the likelihood of higher rates. The 10-year yield moved above 1.8% and seems likely to move higher in the short run. The CME odds of a December hike stand at 74% and if the Fed does pull the trigger it will give the Dollar further upside momentum. This will be another headwind for corporate earnings and hence, for stock prices also.

This week looks bearish as Mars enters Capricorn on Monday and Tuesday. We should expect at least one significant down day out of those two, perhaps on the order of a 1% decline. I would think Tuesday is more bearish in this respect than Monday. Monday features a bullish alignment of Mercury, Jupiter and the Nodes so it is possible we could see some upside. Nevertheless, the Mars influence here is a fairly reliable timing indicator of

some downside. If there is more bad news for Hillary Clinton over the weekend, then Monday could see a swift sell-off. Despite the MercuryJupiter influence, I would not rule that out either. The rest of the week also offers the bears more opportunities as the Moon conjoins Saturn and Mercury on Wednesday and the Moon aligns with the Lunar Node on Friday. Thursday could see some upside although it seems unlikely to significantly change the bearish bias this week. Overall, I think the chances are good that the SPX breaks below support at 2120. If Monday is higher, then we could have to wait until Wednesday or Friday for this to occur. Otherwise, it could come as soon as Monday. Next week (Nov 7-11) finally brings this election campaign to a merciful end. I think more downside is likely later in the week. Monday sees Venus enter Sagittarius so some upside is probable in the early going. I had thought that any postelection declines would be a case of the market “selling the news” after a Clinton victory on Tuesday night. That may still be the case, although now we also have to consider the possibility that any post-election declines could come from Trump legally contesting the result. This would be far more bearish for the market as it would introduce uncertainty about the transfer of power. Admittedly, this isn’t a probable scenario, but the horoscope of the USA does look quite difficult in November and again in January at the time of inauguration. A rebound is likely to take hold sometime in mid to late November and extend into December. I’m uncertain how strong this rebound could be, however. With a strong likelihood of more downside in early 2017, rebounds may be fairly short-lived as the market sets up a lower high which is then sold off heavily. I think the chances are good that the SPX will break below the previous low of 1810 at some point in 2017, possibly as early as April. The period from April to July looks more bullish so that could the period where a major rebound is undertaken. More downside is very likely from August to October as Saturn aligns with the Lunar Nodes. At this point, I’m uncertain if we will see lower lows by the fall of 2017.

Technical Trends

Astrological Indicators

Target Range

Short term trend is DOWN (1 week ending Nov 4)

bearish (confirming)

SPX 2080-2120

Medium term trend is UP (1 month ending Dec 4)

bearish (disconfirming)

SPX 2050-2120

Long term trend is UP (1 year ending Nov 2017)

bearish (disconfirming)

SPX 1500-1800

Indian Stocks Stocks suffered only modest declines last week as fears of a Fed rate hike in December was somewhat offset by an improving domestic outlook. The Sensex lost only half of one percent to 27,941 while the Nifty finished the week at 8638. This bearish outcome was in keeping with expectations although I thought the downside would have come in the second half of the week. As it happened, only Monday was slightly higher and then sellers moved in. The low of the week occurred on Thursday but Friday was actually slightly higher. Stocks are holding up rather well despite significant headwinds. Odds of a Fed rate hike in December have risen above 70% and this has taken the Dollar higher. Barring some sudden developments in the coming weeks, it seems likely the Fed will raise interest rates. This will likely create some pressure on Indian equities as FII inflows will likely be reduced. However, the domestic picture remains fairly encouraging so this could limit any downside in the event of a global correction. The US elections are now an additional source of anxiety for global markets as the FBI has re-opened its investigation into Hillary Clinton’s emails. Markets are pricing in a Clinton win on 8th November so anything that could undermine that outcome is likely to create some volatility. For what it’s worth, I think Hillary Clinton is very likely to win the presidency although her current problems may linger for several days. The race may tighten in the coming week and this could embolden Donald Trump to challenge the results and refuse to concede in the likely event that he loses. A legal challenge to the election result would create even more uncertainty. Certainly, the horoscope of the USA is quite afflicted in November so this kind of scenario should not be easily dismissed. The US political situation is therefore another potential reason why I think Indian stocks are likely to remain under pressure for at least part of November. I am uncertain how much of a decline we can expect in November. It is still possible we could see a move all the way down to the 200 DMA near 8100. The ongoing SaturnNeptune-Rahu has the potential bearishness to coincide with such a move. However, it would also not surprise me if we got modestly lower lows here as Jupiter begins to strengthen as we move further into November. Jupiter is due to align with Pluto on 24th November so that could limit the preceding downside both in terms of magnitude and time period. While stocks have been consolidating since early September, we have not seen much downside so far. This could well continue into November. However, the likely rebound in late November and December may not be very strong and could produce a lower high. Since I remain generally bearish for Q1 2017, I think the chances are fairly good for creating a bearish set up of a lower high which is then sold more aggressively starting in either late December or early January.

The technical outlook is looking vulnerable here as the Nifty is struggling to remain above key horizontal support at 8500. Thursday’s low was somewhat higher than this level so it is possible we could see the bulls hang on for a little while longer. However, the Nifty could not puncture the 50 DMA and the previous week’s high at 8710. This demonstrates the skittishness of the bulls at the moment as the overall environment is less than conducive to taking major long positions. After the bearish crossover of the 20 DMA, the market is looking more like it wants to go lower before it can consolidate and attempt a more serious rally. The other problem for bulls is that the indicators are not yet oversold as the RSI still has some ways to fall before hitting the 30 line. I would think a close above 8710 could improve sentiment and would point to a retest of the last major high of 8900. Conversely, a close below 8500 would open the door to a potential downside target of 8100. The descending triangle pattern since September looks bearish enough and definitely hints at more downside in the near term. The 8100 level is very close to the 200 DMA and would be a more appropriate level for cautious bulls to enter a long trade. The weekly BSE chart is also looking somewhat bearish as MACD and stochastics are in a bearish crossover. Stochastics is getting close to oversold at the 20 line although it could easily fall below crucial support here at 27,500 before bears are pressing their luck. But it may mean that bears may only be entitled to one more downward thrust before a larger rebound becomes more likely. Meanwhile, Infosys (INFY) fell to lower lows last week as the process of consolidation continues. There is still considerable horizontal support from the 2015 lows so it seems unlikely that prices will suffer some any kind of sudden plunge. And yet, this protracted process is raising questions about the long term viability of the bull market in this stock. The 200 DMA is now sloping downward and the 20 and 50 DMA are in a bearish crossover. Buyers will have to come in fairly soon in order to keep prices above the key 2015 lows or else risk a more thoroughgoing collapse. HDFC Bank (HDB) broke support last week but recovered somewhat in the late week. Bulls will have to try to push prices back above the 50 DMA soon or else risk more downside testing. The chart is looking more neutral here and suggests it may be range bound until a new direction is found. This week leans bearish again as Mars enters Capricorn on Tuesday. With Monday closed for Diwali, Tuesday looks more negative not only on the Mars influence but also because of the SunKetu aspect. Wednesday also has an added bearish potential as Mercury aligns with Saturn. Thursday looks somewhat less bearish, however, as the Moon conjoins Venus in the morning. Friday also seems somewhat bullish as the Sun aligns with Jupiter. While there are some favourable late week influences here, I am less

inclined to think the stocks will rise this week. Further downside is therefore likely on Tuesday and Wednesday, with a possible retest of support at 8550 and 8500 more likely than not. I would not say a breakdown of support is not probable although that could still happen. Even if the late week is more forgiving for stocks, it’s unclear if the Nifty can finish higher. I tend to think not, although it may be a fairly close call. I suspect stocks will finish lower but probably somewhere above key support at 8500 and current levels at 8638. Next week (Nov 7-11) also offers the bears another opportunity. The key aspect here is the Mars-Saturn alignment on Wednesday the 9th. This is the day after the US election and suggests the market may have a negative reaction to the outcome. While it’s conceivable that this is due to a Trump win, I think it is more likely the result of some uncertainty regarding the result, such as Trump contesting its legitimacy. The early week could lean bullish, however, as Venus enters Sagittarius on Monday and Tuesday. If the early week is positive, it is possible that the postelection period may only offset these preceding gains. Therefore, it is unclear if we will see the Nifty break below 8500. The following week (Nov 14-18) also has some bearish potential as Mercury aligns with Mars. It is unclear if we will see lower lows, however. I think the rest of November looks fairly choppy although I would not expect further significant downside. Early December looks fairly bullish but some declines are likely in the latter half of the month. January also looks bearish and we should get a lower low sometime in January or February. At minimum, this will test the 200 DMA at 8100 and it could also be somewhat lower than that. Stocks may be range bound for the rest of Q1 2017 but should rally somewhat from about April to June. However, another major correction is likely from July to October on the Saturn-Rahu alignment. This may well produce lower lows which could challenge the previous lows of 6800.

Technical Trends

Astrological Indicators

Target Range

Short term trend is DOWN (1 week ending 4 November

bearish (confirming)

8500-8600

Medium term trend is UP (1 month ending 4 December)

bearish (disconfirming)

8300-8500

Long term trend is UP (1 year ending November 2017)

bearish (disconfirming)

6000-8000

Currencies The Dollar retraced modestly last week after pushing to new highs earlier in the week. The DX touched 99 on Thursday before sellers prevailed on Friday following the latest chapter in the Clinton email saga. This bearish outcome was in keeping with expectations as I thought the MarsUranus square would correspond with some selling. The Euro finished higher just below 1.10 while the Rupee held steady near 67 while the Yen weakened to 104. Despite the modest decline, the Dollar is still looking quite bullish as it follows a rising channel that could conceivably take it back up to 100. Support is initially at 98 in the event we get more retracement. A breakdown of this support level could see the Dollar fall back to the 50 and 200 DMA near 96. The trend is still bullish, however, so this would likely be a buying opportunity. For the first time since last year, the 50 DMA is in a bullish crossover with the 200 DMA, a so-called “golden cross”. Although these are supposed to be bullish indicators, in practice they often signal a period of consolidation. This contrarian indicator may therefore mark a time when the Dollar is more likely to retrace, at least in the short term. The weekly Euro chart is pushing up against resistance at 1.10. A weekly close above that level would be bullish and could signal a return to the previous trading range of 1.101.15. This week looks more bearish. Some early week upside is possible on the entry of Mars into Capricorn but overall I would lean bearish here especially in the late week. It is still possible we could see a run up to resistance at 100 although I would be skeptical about further upside. The late week should be bearish enough to produce a down week overall. I am uncertain if we will see a test of support at 98, however. Next week also looks bearish so that increases the likelihood of a retest of 98. We may well break below that level. November has a bearish bias for the Dollar so there is an increased risk that it could retest channel support at 96. The indications are somewhat mixed so the probability of such a pullback may only be moderate. Nonetheless, I would think that declines are somewhat more likely than gains. December looks more bullish, however, and may reflect an eventual Fed rate hike on the 16th. A pullback is likely in January but more upside looks likely for February and March. I think the chances are good that the Dollar will again test resistance at 100 and could break above that level in March. Overall, 2017 is looking quite bullish for the Dollar.

Technical Trends (Dollar)

Astrological Indicators

Target Range

Short term trend is UP

bearish (disconfirming)

98-99

(1 week ending Nov 4) Medium term trend is UP (1 month ending Dec 4)

bearish (disconfirming)

96-98

Long term trend is UP (1 year ending Nov 2017)

bullish (confirming)

100-110

Crude oil Crude oil retraced lower last week on increased US supply data and a stronger Dollar. WTI fell 4% on the week to below $49 while Brent finished the week just below $51. This outcome was somewhat unexpected as I thought we might have seen more early week upside. I was expecting a significant pullback in any event, although I thought it might begin more forcefully in November. As it happened, prices fell on Monday and the selling did not stop until Friday. The size of the pullback was fairly predictable, however, after retesting resistance at $52. The first level of support is around the $47-48 area which roughly matches the 50 DMA and the previous August high. The rally may only be in trouble if there is a move below $47. In that event, longer term bulls may opt to defend the 200 DMA at $43. The chart looks bullish with higher lows and equal highs. Bulls may only become uncomfortable if we get a low below the August low of $39. If WTI moves above $52 then we would see $65 as a possible upside target from the measured move based on the previous August low. The weekly Brent chart still looks bullish as it presses up against horizontal resistance. Whatever the vulnerabilities of the daily WTI chart, the weekly chart does looks generally bullish. However, over the medium term there is a risk that there is a bearish rising wedge pattern evolving. A test of rising wedge support at $48-50 would therefore provide important new information about the viability of this rebound rally. If the support line is broken to the downside, there is a risk of a more serious decline, perhaps down to a rising channel support at $35. This week looks like it will produce more downside, especially in the first half of the week. Mars enters Capricorn on Tuesday and this could broadly coincide with some declines. Tuesday and Wednesday are perhaps more bearish than Monday in this respect. If Monday happens to be higher, then I would still expect lower lows by Wednesday. A test of the WTI 50 DMA at $47 looks very doable. Thursday and Friday may be somewhat more bullish as the Sun aligns with Jupiter. Overall, I would lean bearish in any event, although perhaps not by much given some of the positive influences in play. Next week looks bullish to start as Venus enters Sagittarius.

The second half of the week looks more bearish, however, so I would be fairly neutral on where crude may end up. My general view is that crude will form an interim low sometime in the middle or late November. This will likely be at or above $43 for WTI. A rebound should begin by late November and last into mid to late December. This does not look too strong, however, so a retest of resistance at $52 is likely but beyond that it is hard to say. Another correction is likely to begin in late December at the latest and continue into January. This may well test the previous low at $39. A significant rally is likely in April and May and possibly into June. However, the summer looks bearish again so crude may have difficulty building on previous rallies for higher highs.

Technical Trends

Astrological Indicators

Target Range (WTI)

Short term trend is UP (1 week ending Nov 4)

bearish (disconfirming)

$46-48

Medium term trend is UP (1 month ending Dec 4)

bullish (confirming)

$48-54

Long term trend is DOWN (1 year ending Nov 2017)

bearish (confirming)

$30-50

Gold Gold moved higher last week on uncertainty surrounding the US election. Gold rose by less than 1% on the week and closed at 1276. This outcome was not unexpected as I had been fairly non-committal about where gold could end up. Despite some modest upside early in the week, I mistakenly thought gold could decline on Friday, however, it finished trading with a solid gain. Gold is hugging the 200 DMA here as investors await new information which could push it either way. While this gain is no doubt welcome for gold bulls, the bounce has been quite small as the chart resembles a bear flag pattern. This is a bearish pattern which tends to break down into lower lows eventually. Stochastics are getting close to overbought and may be on the verge of a bearish crossover. This is an indication that gold could reverse lower fairly soon. Bulls still have some ways to go before the chart looks bullish, such as a close above 1310. While that is still possible, it may take some time. Critical support is still at 1250 so any move below that level could begin a new leg lower. If 1250 falls, I would think that 1200 would be up next as a downside target. That could be a meaningful level for bulls to enter long positions and yet the chart would still look

vulnerable to more declines. In the event of a violation of 1200, the downside target would be close to 1030, which is fairly close to the previous low of 1050. While I think gold will eventually retrace to that level, it may take some months yet. This week leans bearish, especially in the second half. The early week could see more upside, however, as Mercury aligns with Jupiter. The entry of Mars into Capricorn on Tuesday looks more volatile although I would not say the odds of a decline are high. Wednesday looks more bearish as the Moon conjoins Saturn. Thursday may be less bearish, however, and a gain is possible. Friday looks more bearish again. There is increased downside risk this week and a retest of 1250 is possible. I would not say such a move is a high probability outcome, however, but it is more likely than it was last week. Next week also has some downside potential. Monday the 7th looks a bit bearish as the Moon conjoins Mars. Some gains are more likely on Tuesday or Wednesday perhaps. Friday looks bearish, however. It is still possible that gold could remain above 1250 here although that is hard to say. The following week also has some difficult alignments that could put downward pressure on gold, especially later in the week. Gold should rebound starting in late November and that could continue well into December. I think it is unlikely that this rebound will return gold to its previous high of 1370. Late December and much of January look bearish and could easily retest the November low, if not lower. Gold looks choppy after that with very mixed patterns from March to July. It could well be range bound, although April may be quite bearish and could produce a new low below 1200. Lower lows are possible by the fall of 2017.

Technical Trends

Astrological Indicators

Target Range

Short term trend is DOWN (1 week ending Nov 4)

bearish (confirming)

1240-1270

Medium term trend is DOWN (1 month ending Dec 4)

bullish (disconfirming)

1250-1300

Long term trend is DOWN (1 year ending Nov 2017)

bearish (confirming)

1000-1300

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. ©2016 Christopher Kevill