WallStreetWeather.net Forecast For Week Of August 29, 2010

Summary Of Last Week’s Influences:
Mercury the planet of communication, commerce, and movement turning retrograde August 20 at the same time Saturn (fear/economic contraction) squared Pluto (debt) along with Jupiter opposing Saturn, has renewed concerns about economic growth.

Mercury entered its “home” sign Virgo July 27 – the day after status quo Saturn completed its final opposition to Uranus, the awakener that began on Election Day 2008. During this time period, expansive Jupiter squared Pluto August 3 and opposed Saturn August 16. Bank of America/Merrill Lynch Economist Ethan Harris says we’re in a “growth recession,” which is a cut to the chase way of summing up all these energies.

The three weeks that Mercury is retrograde is a time for review and reflection; a time to put the re prefix in front of everything. Mercury in Virgo loves to analyze data which during retrograde is particularly subject to revisions. Second quarter GDP (Q1 was 3.7%) was revised downward but came in slightly better than expected at 1.6%, causing the market to rejoice Friday.

Since Mercury is a dualistic energy, a better than expected GDP was not the only news that propelled the market to its biggest one day gain since August 2 in a week that ended lower. The market felt reassured by Fed Chairman Ben Bernanke’s Jackson Hole speech that the Fed is ready to act “if the outlook were to deteriorate significantly.”

The Moon represents the mood of the market. The Full Moon fully illuminates the issues described by the sign the Moon is in. Tuesday’s Full Moon in Pisces shined the spotlight on the market’s addiction to ever increasing doses of Fed support. Just like an addict, they will never be satisfied in their quest to profit from lower interest rates.

Transiting Neptune crossing the USA’s natal Moon in Aquarius, together with the Full Moon conjoining the sector representing real estate in the chart of the Full Moon set for Washington DC, reflected the market’s bad reaction to July existing home sales which fell 27.2% to 3.83 million – the biggest monthly decline ever.

As I described in my post on the Summer Solstice, the American Dream is undergoing a radical transformation over the next several years. If the market is freaked out that July unsold home inventories are at a 12.5 month supply, wait until the banks finally decide to stop stalling and add their properties to the pile. Home prices have only declined to 2004 levels. In many parts of the country the bottom won’t occur until prices return to where they were in early 1995 before Pluto entered Sagittarius that ushered in the era of excess debt.

Although Saturn has squared Pluto for the final time, the end of one cycle indicates the beginning of a new one. This is especially the case as Jupiter, Saturn, Uranus, and Pluto this summer made challenging alignments to each other at the beginning degrees of cardinal (initiating) signs. The economy is going through growing pains as it adjusts to surviving with less fiscal stimulus and makes the transition to a new economy that is not overly dependent on consumer spending. But Wall St. and other large corporate interests have become far too comfortable with government support, so it is in their best interests to spread the fear which in turn breeds more fear. Why should the “free marketers” take risks when they can be supported by the government and the Fed at the public’s expense? Economic conditions have improved since the darkest days of the financial crisis, yet monetary policy is far looser now than it was then.

It just wouldn’t be Mercury retrograde without two more recalls from Johnson & Johnson (JNJ). This time it was hip replacement implants that needed to be replaced at more than twice the industry average. Earlier in the week 100,000 boxes of contact lenses sold in Europe and Asia were removed from the market due to manufacturing problems.

Summary Of This Week’s Influences:
This week looks to begin where Friday’s market left off. The Moon in Taurus Monday and Tuesday emphasizes banking and finance. Taurus rules money and on Monday we’ll see how much money consumers are saving vs. spending.

I call Wednesday a “triple Mercury” day since Mercury rules Wednesdays, and the Moon and Mercury are in Mercury-ruled signs at the last quarter Moon in Gemini. This could bring information overload, currency reversals, multiple circuit breaker triggers (which happened three times with Intel shares last Friday), problems with data feeds and computer systems, travel delays/cancellations, and a greater potential for experiencing some of the snafus that Mercury retrograde is famous for.

The biggest planetary event and market event this week occurs on Friday when the August employment report is released. Five minutes later the Sun and Mercury will conjoin in Virgo, the sign ruling the labor force.

Consensus estimates project a loss of 118,000 public sector jobs and a gain of 42,000 private sector jobs, resulting in a net loss of 76,000 jobs in August with the unemployment rate projected to rise 0.1% to 9.6%. The Sun conjoining Mercury retrograde in Virgo increases the potential for major revisions to previous reports. The Moon will be in its home sign Cancer, emphasizing the employment report’s effect on the consumer economy.

The Sun conjoining Mercury retrograde could remind us that on average, September historically tends to be a downer month for the Dow. A key driver is when the market realizes the Fed can’t just double its balance sheet every time there’s a little bit of fright. Any move now by the Fed weakens its ability to effectively react to a more serious problem later. Like it or not, the Fed’s ammunition is not limitless. Bernanke must choose his economic offensives judiciously.

Monday, August 30, 2010

Tuesday, August 31, 2010
Positive trend bias.

Wednesday, September 1, 2010
Positive conditions weaken to choppy/mixed before turning negative.

Thursday, September 2, 2010
Strongest early and weakens as day progresses, closing negative.

Friday, September 3, 2010

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