WallStreetWeather.net Forecast For Week Of August 17, 2009
Summary Of Last Week’s Influences:
Even though the major indices ended the week only slightly lower than where they began, a tiny air hole is beginning to develop in the bull’s hot air balloon. July retail sales and the University of Michigan’s Survey of Consumer Sentiment came in lower than the market expected, reflecting that Wall Street and consumers are indeed living in parallel universes.
July CPI was unchanged and year over year was down 2.1%, the sharpest annual decline since January 1950 when Saturn was also transiting Virgo. Saturn in Virgo (2007-2010) reflects that consumers are limiting most of their spending to necessities. In last week’s Forecast I wrote that I thought inflation might have come in higher than expected, but because of the weird way inflation is calculated by the BLS, a 28.1% drop in energy prices year over year offset increases in the food index and Core CPI (ex food and energy). Never mind that last July’s $145 barrel oil was an outlier. The cost of new vehicles, medical care, apparel, and air fares increased in July. And the cost of the roof over your head (the shelter index) was lower because lodging away from home fell. (I’ll refrain from commenting on the “logic” of that.)
The Federal Reserve did take baby steps to “de-emphasize” its debt purchase programs, announcing that its purchase of Treasury securities will be completed by the end of October, while continuing to emphasize that the fed funds rate will be kept low “for an extended period.” As long term interest rates will be allowed to slowly rise, while short term interest rates are capped near zero, bank net interest margins will expand. This is Bernanke’s not so stealth method of pumping up the profitability of the banking system on the backs of consumers.
The Fed’s policies have not helped borrowers or savers, but Wall Street has certainly rebounded nicely. Monetary policy is the only case the bulls can make to keep the stock market on an upward trajectory. Bank analyst Richard Bove commented last week that the rally in bank stocks reflected psychology, not fundamentals.
In the Bank of America/Merrill Lynch bonus saga, Judge Rakoff expressed his “continued misgivings” at last Monday’s hearing, ordering BofA and the SEC to submit additional information on their $33 million civil settlement to him within two weeks.
Besides the rally being an opportunity to take profits on stocks bought last autumn through winter, thankfully bullish sentiment has kept CNBC from sending reporters to stand out in front of troubled banks like they did last year. Yet the FDIC has kept busy on Friday nights, and last Friday was particularly busy. Colonial Bank, with 346 branches in five states, became the biggest bank to fail since Washington Mutual last September. BB&T Corp. (BBT) has assumed all of Colonial’s deposits.
As the planetary energies become more volatile through the autumn, I’m not the only one who doesn’t automatically reject the possibility that the stock market could drop below the levels reached in early March.
Summary Of This Week’s Influences:
The Sun ends its sojourn in its “home” sign Leo this week. On Monday the upward inclination of the Sun aspecting Mars and opposing Neptune (while Mars harmonizes with Neptune) is met with cautious resistance by Mercury conjoining Saturn, as news events and/or analyst opinion could dampen the lion’s courage to be in full bull mode. Mercury conjoining Saturn emphasizes studying the fine print and taking all the details into account.
Mars in Gemini challenging Uranus in Pisces influences Tuesday/Wednesday, increasing volatility and fast and sharp market moves that can create an up or downside surprise. It’s important to focus on one thing at a time and use caution in driving. Electronic and mechanical breakdowns could occur now.
The chart for Thursday’s New Moon in Leo (6:02 AM EDT) shows large market moves between August 20 and September 18, tending to the downside over fears about economic contraction, the Administration’s financial regulatory reform, and action on healthcare reform in Congress.
Mercury opposing Uranus on Friday Options expiration could create some wild gyrations. There could be communication disruptions and problems with data feeds.
Bernanke will be speaking Friday at the Fed’s annual conference in Jackson Hole on “The Year of Crisis.” The Fed Chairman thinks he saved us from “Depression 2.0,” but in reality the consumer driven economy that he believes he’s recreating will never be as it was again.
Monday, August 17, 2009
Choppy/mixed conditions to the upside. (DJIA and S&P are likely to be stronger than NASDAQ.)
Tuesday, August 18, 2009
Positive trend bias especially early in session. Starts losing momentum and becoming more volatile as day progresses, probably ending choppy/mixed to moderately up.
Wednesday, August 19, 2009
Volatile; could see large moves in either or both directions, but bias is to the downside.
Thursday, August 20, 2009
Choppy/mixed to positive bias.
Friday, August 21, 2009
Volatile; news driven session could swing in either or both directions, but tendency is negative.
Posted 8/16/2009 06:11:00 PM