WallStreetWeather.net Forecast For Week Of October 31, 2010: "Trick or Treat Edition"
Today is Halloween, a modern twist on ancient celebrations that occur around this time of the year when the Sun (the life force) is transiting Pluto-ruled Scorpio, the sign of death and transformation. It is believed that the veil separating the living and the dead is lifted to help us come to understand the interconnectedness between the two worlds.
Of course Halloween is all about all kinds of terrifying creatures, ghosts and zombies (the living dead) roaming around. And what’s truly “unbelievably terrifying” to quote GMO’s Jeremy Grantham’s “Night of the Living Fed” is that every voting member of the FOMC has become a zombie except Thomas Hoenig.
The Fed acts like zombies because they continue to do the same thing over and over again. Fed Chairman Bernanke’s mentor is “Chief Zombie” Alan Greenspan who taught him that when one bubble bursts, another one needs to be conjured to create the “wealth effect.” In addition to promising near zero interest rates for an “extended period,” the Fed talks of the treats of QE2 and inflation targeting, so that all that debt (Scorpio/Pluto) left over from when the last bubble burst just over one Mars cycle (2 years) ago becomes cheaper to service.
The Fed wants investors to become zombies like them, under the illusion that reflating asset prices makes investors feel wealthier so they’re more likely to spend and employers are more likely to hire and grow their businesses. As PIMCO’s Bill Gross writes in his latest Investment Outlook: “The Fed, on Wednesday, however, will decide that it is better to keep the patient on life support with an adrenaline injection and a following morphine drip than to risk its demise and ultimate rebirth in another form.”
By trying to spare the economy from Pluto/Scorpio’s death and dying process that will take place one way or another over anyway, the Fed is only prolonging the pain at best and at worst runs the risk of keeping the economy in a zombie-like state for the next several years. Wall St. knows another round of quantitative easing won’t work, but they’ve become too addicted to the Fed’s drugs. That’s why the lead story in Wednesday’s Wall Street Journal hinting that QE2 could be much less than what the market was anticipating was enough to give the market pause. Imagine how the market might react if Bernanke was bluffing.
Illusions, bubbles, drugs, and addictions are part of Neptune’s domain. Neptune has appeared from Earth’s vantage point to be moving retrograde in the sky since May 31. Neptune’s energies are more pronounced November 2-11 as the planet appears to be stationary in the sky as it turns direct November 7. When Neptune’s energies are prominent, there is an opportunity to awaken from the illusion that everything is separate rather than interconnected. The market has been eagerly anticipating the results of the Midterm elections Tuesday and the FOMC meeting on Wednesday. Yet in true Neptunian fashion, the outcomes of both of these events might be somewhat confusing and raise more questions than they answer.
Consensus estimates for Friday’s October Employment report keeps the unemployment rate unchanged at 9.6% with a gain of 60,000 jobs. Although I think the report will come in slightly better than expected together with September’s figures revised to show a loss of less than 95,000 jobs, the market’s reaction is not likely to be favorable, especially in the bond market.
Monday, November 1, 2010
Tuesday, November 2, 2010
Positive trend bias but potential for intraday reversal.
Wednesday, November 3, 2010
Market strongest early, then starts losing steam as day progresses; closes mixed to negative.
Thursday, November 4, 2010
Friday, November 5, 2010
Negative conditions improve as day progresses, turning positive by the close.
Posted 10/31/2010 06:45:00 PM