WallStreetWeather.net Forecast For Week Of July 11, 2010

Summary Of Last Week’s Influences:
Planets turning retrograde can reverse market direction. Uranus represents extremes; its July 5 retrograde station reversed market direction from a bearish trend to a bullish one.

The Dow had its best weekly gain since the week ending July 17, 2009 which also occurred between two eclipses. Being an abbreviated holiday week, the gains came on lower than average volume. (Friday’s volume at the NYSE was the lowest this year.)

Tuesday certainly reflected the first trading day after Uranus turned retrograde as a triple digit rally fizzled at midday, turning choppy/mixed to negative until staging a reversal in the final minutes before the close. Bank stocks were the strongest performers during Wednesday’s rally under the Venus-ruled Taurus Moon which was the biggest one day gain since May 27 when Uranus entered Aries.

Bank stocks were boosted by news that European bank regulators will release the results of the stress test on 91 European banks on Friday (the day ruled by Venus), July 23. With Jupiter turning retrograde then as it squares Pluto in Capricorn and the Moon (sentiment) in Capricorn, the results might not meet expectations. These planetary energies reflect the stats from the Bank for International Settlements quoted in a New York Times article. Banks worldwide will have to roll over a Jupiter sized debt (Pluto) of nearly $5 trillion coming due through 2012; over half of those liabilities are coming from European banks.

In a prior Forecast I commented that the upcoming planetary alignments particularly Uranus exactly squaring Pluto during 2012-2015 could bring about peace for the sole reason we can’t afford war anymore. Reflecting the strong energies of Uranus last week, agreement is beginning to push through from both political extremes. In a joint blog post in The Hill, House Financial Services Chairman Barney Frank and Rep. Ron Paul explained “Why we must reduce military spending.” Wall Street Journal columnist Gerald Seib wrote about the “Pentagon’s New Mission: Cutting Back on Spending.” Uranus rules trends and Aries the military, and Seib described the Frank/Paul post as a sign that “a trend is taking shape.”

As I wrote in a Forecast six months ago, this new trend will help Defense Secretary Gates transform the military. (The Federal Reserve should take note that Gates is factoring into the Pentagon’s budget an increase of 2-3% a year to allow for inflation which will be offset by other cuts.) The Gemini New Moon cycle certainly spilled out a lot of military dirty laundry, including new investigations of two (Gemini!) Pentagon contractors in Kyrgyzstan that have received billions for supplying fuel to the troops in Afghanistan.

Summary Of This Week’s Influences:
The week begins with the Solar Eclipse in Cancer. With the Moon in speculative Leo Monday and Tuesday, the focus is on the stock market and trading activity. The market will thoroughly dissect all the details of corporate earnings with the Moon in Virgo Wednesday through mid morning Friday as it joins Venus, Mars, and Saturn in Virgo. The Moon moving into Libra Friday could increase uncertainty over which direction the market is really headed.

South Korea raised interest rates last Friday while Australia left rates unchanged but hinted at increases over time. Both of these announcements were viewed as a sign of confidence by global markets. Imagine if the Fed had dropped the “extended period” from its statement at its June 23 meeting, let alone raised rates then as I had previously described! Instead, Wall St. will be anticipating the release of the Minutes from the June 23 meeting to try to discern how long “extended period” can stretch to.

Meanwhile Kansas City FRB president Thomas Hoenig last week reiterated his desire for a 1% interest rate target, citing asset price bubbles and the risk of stoking inflation beyond the near term. Although other FRB presidents (Bullard, Fisher, Lacker, and Plosser) have expressed reservations about the “extended period” language to various degrees, no other voting member has joined Hoenig’s dissent at an FOMC meeting.

Thursday at 10 AM the Senate Banking Committee is scheduled to hold a hearing on President Obama’s nomination of San Francisco FRB president Janet Yellen for Fed Vice Chairman , along with the nominations of Peter Diamond and Sarah Bloom Raskin to serve on the Fed Board of Governors. Since the Republicans like to block anything President Obama wants (except for the reappointment of Ben Bernanke and more war spending), they could use this opportunity to make themselves useful by voting against Yellen’s nomination on the grounds that having previously served on the Board of Governors from 1994-97 and as the president of the San Francisco Fed since 2004, she is part of the Greenspan/Bernanke legacy that is largely to blame for precipitating the financial crisis.

The June Producer Price Index (PPI) will be released on Thursday followed by the CPI on Friday. A discrepancy between the two reflects that many companies are choosing not to pass costs through to consumers (at least not in ways that are directly factored into the government’s calculations). Since the cost increases exist, this could change at any time.

The Fed should explain how last week’s announcement by the Post Office to raise stamp prices 5.6% to 46 cents is not inflationary. In a statement announcing the price increases, the Post Office cited online transactions eating into their revenue. The Fed would probably say that consumers can choose not to pay the increase by conducting even more transactions online. Yet additional online transactions have increased the amount of package shipments, and the Post Office is raising package prices 7%.

Monday, July 12, 2010
Market improves as the day progresses, ends positive.

Tuesday, July 13, 2010
Market weakens as the day progresses, closing negative.

Wednesday, July 14, 2010
Negative conditions improve to mixed to positive conditions in the final hour.

Thursday, July 15, 2010
Choppy/mixed to negative trend bias.

Friday, July 16, 2010
(Options expiration) Negative.

Related Post: The Summer Solstice

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