4 May 2013 Volume 6, Issue 19 US Stocks

4 May 2013 Volume 6, Issue 19

Summary for week of 6 May 2013

• Stocks trending higher in first half of week but declines more likely after that

• Euro should extend gains into Wednesday; sudden declines possible afterwards

• Crude likely to continue stronger this week albeit with risk of sudden decline near Friday

• Gold continuing to firm up but volatility may increase as week progresses

US Stocks Stocks pushed to new all-time highs on a better than expected jobs report that showed unemployment had fallen to 7.5% as 165,000 new jobs were created in April. The Dow climbed more than 2% closing at 14,974 while the SPX finally closed above the 1600 level at 1614. This bullish outcome was somewhat unexpected as I thought the Mars-Saturn opposition aspect would have done more midweek damage. While Bernanke’s comments on Wednesday pushed stocks sharply lower more or less on cue with the opposition aspect, I did not expect any late week gains would be strong enough to produce a bullish result here. My medium term outlook has been bearish recently as a number of planetary factors were all leaning negative just at a time when the market was pushing up against resistance and was overbought. It seemed like a plausible recipe for a decline. Alas, the mid-April pullback has come and gone and stocks have rallied back to new highs. I had noted the importance of the current eclipse period from April 25- May 10 as a time when bearish outcomes were somewhat more likely and when the market was more subject to change its trend. So far neither of those outcomes has come to pass as stocks remain locked in their up trend. To be sure, eclipses should be seen as potential turning points (in either direction) so if the trend has been up going into the eclipse, then there is an increased probability of a decline in the days following the eclipse. The solar eclipse is due on Thursday and Friday May 9-10. This is therefore the next plausible reversal point when we could see the market correct or at least pullback. But with late May looking bullish, it seems unlikely that any May pullback will be large enough to change the fundamental dynamic of this bull market. The June-July Saturn-Neptune aspect is perhaps a better bet for coinciding with a significant decline. Even there, I would admit that the chances for a large correction are only slightly better than chance. In other words, that early summer alignment is not a high probability bearish pattern. That means that the chances are that this central bank-fueled bull market bubble could very well continue through 2013 and into 2014 with only relatively small declines along the way.

Astrology aside, one of the reasons for my ambivalence here is that the technical situation still looks bullish. Yes, the market is quite overbought by most measurements, but that matters less these days. The long term monthly chart shows that the key indexes are pushing up against some important resistance. The SPX is virtually right at its trend line resistance from its previous highs in 2000 and 2007. This would tend to argue against much more upside any time soon. However, the Dow and the Russell 2000 have more room to run on the upside before they hit their resistance levels. That trend line resistance on the Dow chart now stands around 16,000. In other words, we may well ask when the Dow is likely to hit this level – in the near term or will it wait for several months before it can reach this trend line resistance? I do think the most likely scenario is that the Dow will hit that resistance level of 16,000 but when it is more likely is another question. We cannot rule out an extension of the rally over the next week or perhaps riding the Jupiter energy in late May and early June. And yet that would mean that the SPX goes over the resistance line in an overthrow move. It seems there are no neat solutions to these awkward chart realities. We still have a sell signal on the Bullish Percentage chart suggesting that the bear picture is not completely invalidated yet. There is, however, a bullish crossover in the NYA50R chart so that weakens the bear case somewhat. But on both charts we can see evidence of lower highs and that is another reason why it may be too risky to take any large long positions at the moment. The weekly Dow chart is again quite overbought and still looking vulnerable to declines. RSI is over the 70 line once again while stochastics is still pointing down and in a bearish crossover. Even if we get more marginally higher highs next week, this weekly stochastics chart is a bears’ best friend because it

strongly favors a reversal sooner rather than later. The problem is that there is no technical indication how deep any correction might be. One would tend to think that such a seriously overbought market would produce a larger correction, perhaps down to the 50-week moving average on the Dow near 13,500. This corresponds to approximately 1400 on the SPX. In its more bullish phase, pullbacks have been bought more readily at the 50 DMA on the SPX, which now stands at 1557. As before, I suspect bulls will only get worried if the market breaks 1535 or so. The more immediate support level is now 1600. All eyes this week are on Thursday’s eclipse. As eclipses go, it’s a little nasty looking as Saturn and Mars are close at hand to the eclipse point. But as we have seen, this hasn’t had much of any effect on the bull market thus far. This is perhaps due to the fact that Jupiter (25 Taurus) forms a minor aspect to the eclipse point at 25 Aries. It is still possible the eclipse could provide the necessary interruption in the sky to break the bull market mentality. I would not be surprised if stocks rallied into the eclipse and then started to pullback afterwards next week. The problem with that scenario is that the short term aspects look a bit rough this week so I would think the bears could well prevail. The short term aspects look more bearish than last week’s, for example. Monday’s Mercury-Moon-Uranus pattern offers a plausibly bullish combination, even if the Sun-Ketu conjunction is more of a question mark. I would still lean bullish for Monday in any event. Mercury conjoins Mars on Tuesday and Wednesday so this tips the scales towards a more negative outcome. That said, this is not a high probability bearish aspect so I would not be surprised if the combination merely reflected a lot of energy, perhaps even on the buy side. But I nonetheless believe that the late week pattern looks bearish more than anything else as Mercury conjoins Ketu. Friday’s Mars-Ketu conjunction also looks quite bearish. Thus far, these negative aspects have inflicted only temporary damage on the bull market. The eclipse increases the odds that we could be near a more important top, although there is no certainty of that either. So perhaps we could see the SPX pushing a little higher early in the week but then finish lower overall as a result of the late week aspects and eclipse.

Next week (May 13-17) will the first test of the possibility that the market may have topped with the eclipse. The early part of the week is hard to call. Mercury enters Taurus on Monday where it forms a bullish trio with Venus and Jupiter – all three planets are considered benefic in nature. But Mars is still in close proximity to bearish Rahu so we cannot be surprised if we get more down on Monday. I would lean bullish, however. Wednesday is harder to call but the late week seems bearish as Thursday’s Moon-Saturn aspect is often bearish and on Friday Mars conjoins the eclipse point itself at 25 Aries. A sharp selloff is therefore more likely at the end of the week, even if it is not quite probable. The week as a whole therefore leans bearish. The following week (May 20-24) is perhaps more pivotal for the medium term. The Sun joins Mercury, Venus and Jupiter in Taurus and should be bullish

for the subsequent two weeks at least. But if the deep sentiment of the market has in fact shifted due to the eclipse, then it is possible this bullish alignment may only produce a lower high, perhaps sometime in early June. As it stands now, however, I think a higher high looks more likely. As the Saturn influence intensifies in June, the odds will rise for some kind of additional decline, and perhaps a full-blown correction. I would not rule out the possibility that a correction could begin in May but it is less certain. The planets look more powerful in June and July so that may be a better time for it. We shall see. Some kind of summer rally is then likely followed by a negative period that begins in August and continues into September. This decline looks significant, although I have my doubts if it will fundamentally sidetrack the bull market. We may well have to wait until mid-2014 for a large enough decline to break significant support levels.

Technical Trends Astrological Indicators

Short term trend is UP bearish (disconfirming) (1 week) Medium term trend is UP bearish (disconfirming) (1 month) Long term trend is UP bearish (disconfirming) (1 year)

Indian Stocks

Stocks extended their rally last week on positive global cues and Friday’s RBI announced a 25 point rate cut. The Sensex climbed more than 1% closing at 19,575 while the Nifty finished the week at 5944. I thought we might have seen more downside around the Mars-Saturn aspect but that produced only modest declines on Monday and Friday. While I allowed for the possibility of a flat outcome, this bullish performance was surprising. Clearly the market is still essentially bullish, the eclipse period notwithstanding. That said, I have noted that while eclipse periods lean bearish, their broader correspondence is with reversals and uncertainty. So it is still conceivable that the solar eclipse on Thursday and Friday this week could have a significant impact as it could mark a high. The market seems generally underwhelmed with the latest RBI announcement as it raised the possibility that rates could actually move higher again if inflation or the current account deficit worsened. Friday’s decline therefore may have contained the seed of the market’s next move. The complicating factor here is that the late May and early June period look more bullish due to the stronger Jupiter presence. If the solar eclipse is going to be a high water mark for the markets, then the promise of more upside in late May would tend to contradict that bearish outlook. I do admit a certain amount of uncertainty in my forecast here. While I think the rally is overdone and the eclipse offers a plausible moment for a reversal lower, it seems unlikely that any down move would be large given the Jupiter influence over the next 4-6 weeks. It may be that we see a sideways market with an extended topping pattern here just under or around long term resistance at 20,000/6000. That would set up a deeper correction in late June and early July on the Saturn-Neptune aspect. This is my most favoured scenario. It is also possible we could just dip for a week after the eclipse and then make a higher high in early June, perhaps somewhere closer to long term resistance at 6100-6300. This would set up a larger technical pullback as the bulls try to consolidate before trying again to push above that long term resistance that dates back to 2007. The monthly chart below shows how important this horizontal resistance at 21,000/6300 is to the market.

What is also important about this monthly chart is that it shows a bullish ascending triangle pattern. The rising support trend line dates back to the 2003 low. Since that date we have see the market make a series of higher lows even if it has been unable to break above the 21,000 level. The chart is clearly bullish as it argues for an eventual break above resistance at some point down the line. At the same time, it is important to note the risk of the failure of the pattern. If the Sensex breaks that rising support line, then there is a risk of a steep waterfall-type decline. This doesn’t mean it will immediately fall to test previous lows.

Perhaps a break down of support from this triangle pattern would mean a retest of horizontal support at 15,000. This could then prompt a rally which back tests the line from below. While the pattern is clearly bullish for the long term, the astrology looks less bullish. In fact, the astrology would seem to add weight to the possibility that the triangle will be broken on the downside and any subsequent rally will attempt to back test the previous support line as resistance.

The daily chart is looking overbought as stochastics is above the 80 line while the MACD histograms look stretched and RSI touched 70 last Thursday. Bulls will try to defend 5850 which has some significant horizontal support. Cautious bears may place their bets at 6100 in the event that the rally tries to reach the previous high. A close above 6100 would be quite bullish obviously and would suggest a run-up to the old high of 6350 is at hand. The weekly chart looks more bullish here as stochastics is in a clear bullish crossover with more room on the upside while MACD is on the verge of turning bullish. The moving averages are also in a bullish crossover now suggesting the possibility that the rally may have further to go. But generally, the market is understood more in terms of horizontal support and resistance. Above 6100 is bullish, while below 5850 is bearish. Even a close below 5850 will not be a huge problem for the bullish view as the bull market is still intact as long as the previous low of 5500 remains in place. Significantly, 5500 (18,200) also coincides fairly closely with the rising trend line support in the ascending triangle in the monthly chart. The overall health of the market may be reflected by the banks which did not do well after the RBI announcement. ICICI Bank (IBN) sold off sharply on Friday after it had been turned back at resistance. This is not a good

sign, especially if it cannot hold at support at $45 here. Infosys (INFY) did better last week, although it is thus far unable to break out of its current trading range. A close above resistance at $45 would be hugely bullish, although the gap above that price is dauntingly large. This week features the solar eclipse on Thursday and Friday. With Mars and Saturn close by, there is a risk of some downside here, especially on the eclipse days. One possible mitigating influence may be the presence of a minor aspect with Jupiter at 25 Taurus with the eclipse point at 25 Aries. This may be one reason why the market may be mostly bullish heading into the eclipse. Monday is something of a toss-up as there is a bearish Sun-Ketu aspect alongside a bullish Mercury-Uranus aspect. I would lean bullish in any event. Then Mercury conjoins Mars as we go into midweek and this may have a bearish bias. The late week eclipse has a highly probability of a bearish outcome as Mars approaches its dangerous conjunction with Ketu. There is some risk of a significant decline on this pairing. The week looks bearish overall, although the early week could conceivably produce some offsetting upside. While some gains are possible in the early going, I would be surprised if the Nifty climbed above last week’s high. The possibility of 6100 is also there but this seems much less likely. A more likely scenario would be a retest of last week’s high that fails and then stocks reverse lower. I think that a test of support at 5850 is very possible here. The fact that there is an eclipse in the mix here also raises the possibility of a steeper decline, perhaps to the 50 DMA at 5750. This isn’t likely, however, but one cannot rule it out. Next week (May 13-17) may begin bullish as the Mercury joins Venus and Jupiter in Taurus. The Venus-Neptune aspect also tips the scales in favour of the bulls. The Sun then also enters Taurus on Tuesday so this is another bullish indication, especially if the market has sold off in the previous week. However, the overhanging cloud here is that Mars will conjoin the eclipse point at 15 Aries late in the week and this could introduce more volatility to stocks. Friday is probably the most bearish day on paper here although I am unsure if it will be enough to produce a down week overall. The following week (May 20-24) ought to be bullish as the Venus-Jupiter conjunction tightens. The first half of the week looks more bullish perhaps with the late week looking more problematic as Mars enters Taurus. While the short term aspects argue for some up side is likely during this week, we will have to wait and see if the eclipse has changed the underlying sentiment. For this reason, I have to remain agnostic on whether the market has enough strength to make a higher high, perhaps to 6100. It is very possible, but at the same time, I admit that I would not be surprised if rallies became weaker and shorter in duration as we proceed through the month of May. There is an important triple conjunction of Mercury, Venus and Jupiter on 26-28 May which should correspond with a burst of buying. June looks more bearish, although I would not rule out a mixed market in the first week or two in June. Overall, June looks more bearish and the negativity could extend into mid-July when Uranus turns retrograde. I would not rule out another test of 5500 at that time.

Technical Trends Astrological Indicators

Short term trend is UP bearish (disconfirming)

(1 week) Medium term trend is UP bearish (disconfirming) (1 month) Long term trend is UP bearish (disconfirming) (1 year)

Currencies

The Euro gained ground last week despite a fairly lackluster market reaction to the ECB’s 25 point rate cut. The Euro finished about 1.31 while the Dollar slipped closer to 82 and the Rupee strengthened to 54. While I was correct in guessing a bearish reaction to Thursday’s rate cut, there was little follow through on the down side as the Euro held its own. As expected, it did not break above resistance at 1.32. The Euro continues to build a right shoulder here at 1.32. Only a close above 1.33 would invalidate that bearish pattern and would convince bears to give up their short positions. For the moment, the Euro looks stable as support was tested at the 50 DMA above 1.30. If it can put in a higher low in the next week, then it could move higher still. The rate cut was already discounted so it remains to be seen if any ECB moves can alter the perception of the European economy. It remains mired in recession with record numbers of unemployed with no apparent solution on the horizon. At least the US economy is growing, albeit slowly. That difference alone is the main reason why the Euro seems unlikely to rally much in the near term. Indeed, the growing divergence in economic trajectories could push the Euro back to support at 1.27-1.28. This week could start on a bullish foot as the Mercury-Uranus aspect activates the Sun in the Euro chart. The bulls are likely to prevail into Wednesday at least on the Sun-Jupiter aspect. Thursday’s eclipse could introduce some bearishness, although that may only manifest on Friday or even next week. I would therefore think we could actually see the Euro rise this week, depending on how sharp Thursday/Friday turns out to be. More upside is possible early next week but Mars will strengthen at this time so there could be some selling in the second half of the week. While the eclipse could generate some downside, there may not be enough to seriously test support at 1.28. And with late May looking quite bullish on the Venus-Jupiter conjunction, the Euro looks more likely to test resistance at 1.33 than support at 1.28. I would therefore lean bullish for the Euro for May. June could see more problems, however, as the Saturn-Neptune aspect could darken the mood. While this aspect is quite negative, the absence of any clear hits in the Euro chart reduces my confidence that it will translate into a clearly bearish influence. It still might, but there is an additional layer of ambiguity. Nonetheless, I would remain generally bearish on the Euro for June and July with a good chance of testing support at 1.27.

Technical Trends Astrological Indicators

Short term trend is UP bullish (confirming) (1 week) Medium term trend is DOWN bearish (confirming) (1 month) Long term trend is DOWN bearish (confirming) (1 year)

Crude oil

Crude rallied last week on improving economic data and central bank easing. WTI crude rose 3% finishing the week above $95. While we did see the midweek decline on the Mars-Saturn aspect, the late week was much more bullish than anticipated as crude rallied all the way back from support at $90. Crude has rebounded strongly here but it remains vulnerable to more downside as long as it is below the previous high of $98. Of course, Tuesday’s low of $90 matched a previous interim low and set the stage for a second leg higher. But now it is up to the bulls to see if they can push prices past the previous high. Stochastics is suddenly overbought so there may be less willingness by bulls to go long. A close above $100 would reverse the current bearish mood as it would break the pattern of lower highs. The medium term weekly chart continues to look broadly mixed as the pennant pattern is still in evidence. The technicals therefore look equivocal enough at this point with neither bulls nor bears in command. Bulls will try to keep crude above the 200 DMA perhaps and thereby create a higher low. This could help to consolidate prices and provide fuel for another push higher towards $100. We could well see some upside in the first half of this week as the Moon transits watery Pisces while Mercury is in aspect with Uranus. The Sun aspects Jupiter later in the week so that may provide enough positive energy to keep crude mostly bullish overall. The late week eclipse looks more bearish so perhaps we could see some weakness on Thursday or more likely Friday. But that may mean that crude does push towards its previous interim high of $98. That seems like the most likely scenario here. Perhaps it will test resistance there and then fall back later in the week. Next week may see more gains early in the week with a possible decline later in the week. I do not expect crude to lose much ground as a result of any of these pullbacks. I would therefore have bullish bias until at least the end of May. While this may not preclude some downside, it seems unlikely to create a new major down move. June could be more bearish, however, so that crude is likely to correct again into early July. At this point, I am not expecting a lower low below $85. Let’s see if May brings a rebound first and then calibrate the likelihood of a higher low after that. The middle summer period looks like it will have a bullish bias, even if there is no huge rally. As before, August and September look quite bearish and we could see a sharp break down of support at that time.

Technical Trends Astrological Indicators

Short term trend is UP bullish (confirming) (1 week) Medium term trend is UP bullish (confirming) (1 month) Long term trend is UP bearish (disconfirming) (1 year)

Gold

Gold managed to hold its own last week in the midst of various central bank easings and reassurances. Gold inched higher closing at $1469. I had been more bearish last week as I thought the Mars-Saturn opposition would inflict more damage. As it happened, the midweek downside was minimal while the rest of the week saw a stalemate between bulls and bears. There are now more sober second thoughts about gold as many may wonder if the sell-off was overdone. As gold claws its way back to its old support level, one may well consider the possibility that it could move all the way back into its previous trading range. That would be fairly shocking if it happened quickly as gold would at least seem to need a period of consolidation before pushing back above $1540. It may well be doing that here as long as it continues to trend higher without any sudden plunges. But the daily stochastics chart is getting close to overbought so that may be one reason for bulls to cash out. For any consolidation to take place, gold would have to have another pullback soon and put in a higher low and then turn higher again. Perhaps this would be most bullish if it occurred above the $1400 level. If gold does suffer another decline and falls below $1400, then it will be more likely to retest its low of $1321. There is a good chance of some early week upside here as the Mercury-Uranus aspect and Venus entering Taurus looks broadly positive. However, the Sun’s conjunction with Ketu is very bearish so it is possible that any gains will be modest or perhaps just fleeting. The midweek Mercury-Mars conjunction looks somewhat bullish although perhaps less so than the early week. If gold is rising into Thursday, then the odds would favour a pullback on Thursday and more likely on Friday. Given the eclipse, it is possible that the decline could wipe out the gains from the previous several days. I would therefore be bearish overall here, just in case we do have one big down day. I’m uncertain if there is enough bullish energy to push gold to $1500 here. I suspect there isn’t and that gold will sink back to $1450 or below. That said, I would be surprised if gold suddenly turned bearish again in May and tested its previous low. Once the Sun and Mercury join Venus and Jupiter in Taurus, gold is likely to rally again into the last week of May. This may be a better opportunity for it to test resistance at $1500 or perhaps even $1540. A bearish trend looks more likely to reassert itself in June, especially after the first week as Saturn approaches its aspect with Neptune. I do not have a strong view on how low it could fall here. I tend to think the decline could be fairly modest. A summer rally looks likely to begin in July and continue into mid-August at least with a stronger decline likely in September.

Technical Trends Astrological Indicators

Short term trend is UP bearish (confirming) (1 week) Medium term trend is DOWN bearish (confirming) (1 month)

Long term trend is UP bearish (disconfirming) (1 year)

Disclaimer: For informational and educational purposes only. The MVA Investor Newsletter does not make

recommendations for buying or selling any securities. Any losses that may result from trading are therefore the result of your own decisions. Financial astrology is best used in conjunction with other investment approaches.

Before investing, please consult with a professional financial advisor. ©2013 Christopher Kevill