WallStreetWeather.net Forecast For Week Of July 21, 2009 (Cancer Solar Eclipse Edition)

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Summary Of Last Week’s Influences:
Venus and Mars in dualistic Gemini continued the previous week’s trend that market moving news would come in twos.

Markets got off to a bullish start last week after the usually bearish financial analyst Meredith Whitney declared Goldman Sachs (GS) a “Buy.” Better than expected earnings continued from JPMorgan Chase (JPM), IBM, and even SuperTARPed Bank of America (BAC) and Citigroup (C) (although their numbers were padded from asset sales). The major indices rallied Thursday afternoon following media reports that the other infamous bear, economics professor Nouriel “Dr. Doom” Roubini, said at a conference that “the recession will be over this year.” Roubini issued a statement after the close that his views “were taken out of context.”

As a Wall Street Journal article about Roubini’s remarks points out, algorithmic trading patterns comprise up to 75% of daily trading volume (which for several weeks has been lower anyway). The problem with “algos” is that these trading programs react on any news that is likely to influence the market, whereas a human would need time to interpret what Roubini had said and/or determine if the info was being accurately reported.

Major planetary alignments such as the current influence of Jupiter (exaggeration; optimism) conjoining Neptune (hopes; rumors) in Aquarius (computer programs) will showcase the flaws of programmed trading. How many of these programs are set to sell everything if the S&P500 hits the 1000 level that many pundits are projecting before moving lower? This type of trading could experience a mega blowup this year, possibly as soon as the time of the August 20 Leo New Moon.

Even though the House Oversight Committee intends to continue its investigation into the government’s role in the Bank of America/Merrill Lynch merger by calling FDIC Chairman Sheila Bair and former SEC Chairman Christopher Cox to testify when Congress returns from August recess, it’s pretty clear what happened. Former Treasury secretary Hank Paulson admitted to the Committee last week that “of course I told him (Ken Lewis) the Fed had the authority to remove and replace him and the Board.” Paulson more bluntly echoed the testimony of Ken Lewis and Ben Bernanke before the committee that the ends justified the means by preventing additional systemic risk.

Summary Of This Week’s Influences:
As yesterday’s Journal observed: “The stock market is recovering not so much on signs of real economic progress, but on relief that disaster may have been averted.” In “Eclipses and Other Planetary Pair Ups Will Bring Back The Bear Market By Autumn,” I explained that issues are likely to be viewed differently during the period between eclipses (July 7 through August 5).

A Solar Eclipse is a “supercharged” New Moon. The New Moon on June 22 occurred at the beginning of Cancer and the July 21 Solar Eclipse at 10:35 PM EDT occurs at the end of the sign. The eclipse marks a new beginning in matters that have existed for quite some time but have yet to be properly dealt with. Cancer represents food, land, agriculture, real estate, consumers/consumer staples, and domestic security. Cancer represents the foundation. With the Solar Eclipse forming a stressful alignment to Pluto in Capricorn and with Uranus the reformer challenging Pluto, tinkering around the edges regarding these matters will prove unsatisfactory this fall as Mars in Cancer will fully activate the eclipse October 15. These energies particularly affect the USA, as the Solar Eclipse opposes the USA’s natal Pluto located in the sector of the USA chart representing the economy and the financial system.

Venus (banking and finance) will challenge Saturn in Virgo at the time of the eclipse. Taurus (Venus) rules the banking/economic sector of the Solar Eclipse chart set for the US. These energies relate to the points raised by John Authers in his Long View column in yesterday’s FT (“Return of the banks’ golden age is an illusion”).

Neptune represents illusion, and with Jupiter still closely aligned with Neptune, investors are under a big illusion that the banks second quarter profits are the beginning of a new financial “golden age.” Saturn represents traditions, chronic conditions, and economic contraction. Saturn in Virgo (2007-2010) represents rising unemployment as jobs are in short supply. Consumers comprise 70% of the U.S. economy and if their income is cut, credit card and mortgage defaults rise. Saturn opposite Neptune (2006-2007) caused the housing bubble to burst, and Saturn opposite Uranus (2008-2010) brought the sudden restriction of credit that shook up the financial system last fall.

Gemini represents two things, and Venus in Gemini challenging Saturn in Virgo at the eclipse indicates that in general, bank profits will be lower going forward. Saturn is the government and rules and regulations; Virgo is about accountability. With Pluto in Saturn-ruled Capricorn in the sector of the Solar Eclipse representing the President, and Saturn ruling the area representing Congress, Washington will pass legislation that like Saturn’s giant rings, reigns in the banks ability to juice profits through credit derivatives and other opaque (Pluto-ruled) non-traditional banking activities. As I have written before, the trend will move towards back to basic banking with shareholders rewarded with fat dividends.

The planetary influences described will continue to raise food prices and other consumer staples. Neptune rules inflation. With the Solar Eclipse conjoining the Federal Reserve’s Neptune, the Fed will likely prove that once again it does not have the ability or the will to prevent inflation and inflation expectations from coming unhinged. (Last week Treasury Secretary Geithner went to the Middle East to convey the Administration’s “strong dollar” policy to allay investors’ fears that their U.S. debt will get diluted.) Bernanke will have ample time to elaborate on the Fed’s view during his semi-annual testimony to Congress on Tuesday and Wednesday.

Morgan Stanley (MS) reports earnings this week, and although their stock chart is not nearly as favorable as Goldman’s, I think that they will be the winner and Goldman the loser in the inflation/deflation debate.

Monday, July 20, 2009

Tuesday, July 21, 2009
Negative early. Becomes choppy/mixed improving to positive going into the close.

Wednesday, July 22, 2009
Choppy/mixed conditions; swings from moderately negative to moderately positive.

Thursday, July 23, 2009

Friday, July 24, 2009

No disclosures.

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