Bullard’s Bipolar Fed Strategy

Published by WallStreetWeather.net

When St. Louis FRB president James Bullard opened the possibility of the Fed engaging in further quantitative easing, in reality he was threatening the banks that if they did not voluntarily increase lending to boost the economy, the Fed would shut out all other avenues for the banks to earn interest income. The market took a sudden drop July 29 after fixating on one sentence in Bullard’s paper entitled "Seven Faces of ‘The Peril’": “The U.S. is closer to a Japanese-style outcome today than at any time in recent history.”

Yet the market completely overlooked Bullard’s explanation that “the FOMC’s extended period language may be increasing the probability of a Japanese-style outcome for the U.S.” Keeping interest rates at close to 0% for an “extended period” anchors the expectation that the Fed believes the economy and inflation are weak and will remain that way for the foreseeable future. Bullard uses the European sovereign debt crisis as an example of how any negative shock that arises is interpreted to mean the Fed will “further delay the day of normalization of the policy rate farther into the future.” Current monetary policy ends up exacerbating “the idea that inflation and inflation expectations will instead fall, and that the economy will settle in the neighborhood of the unintended steady state, as Japan has in recent years.” As Bullard said on CNBC’s Squawk Box the next day, “If we promise to stay at zero for ten years, we’re going to be like Japan.”

You would think Bullard’s concerns about a Japanese deflationary decade washing up on U.S. shores would find him dissenting alongside Thomas Hoenig at FOMC meetings for the Fed to drop the “extended period” language and tighten interest rates. Although Bullard said on CNBC that he is still an inflation hawk, he is advocating the Fed return to quantitative easing by purchasing Treasuries “if the situation arises.”

The Fed would be invoking the nuclear option if it ever enacted Bullard’s plan to purchase up to $2 trillion in Treasuries as the Fed would create the equivalent of a giant short squeeze in the wholesale banking market since Treasuries serve as its currency. And as I described in “Bernanke Tells Wall Street the Fed’s Hands Are Tied,” the Fed Chairman has subtly told us that venturing into these territories would “present risks” as such a move by the Fed would cause substantial damage to the plumbing of the wholesale banking system. The Treasury’s primary dealers would be the only ones benefitting from such a policy since the Fed foolishly does not buy directly from the Treasury.

Such a level of quantitative easing would force the banking system to overcome risk aversion by forcing banks to lend to consumers and businesses for their very survival as the banks would have run out of places to park money. The theory is that as credit expands, it will kick start the economy. But Bernanke has stated that falling collateral values are preventing small businesses from obtaining loans.

Forcing banks to take undue risk for the sake of the economy would result in banks recklessly engaging in the behavior that precipitated the financial crisis in the first place! Banks could still decide not to lend to small businesses and consumers, preferring to party like its 2007 by engaging in LBOs, M&A financing, etc. The outcome could easily cause a recession far deeper than has already been experienced.

Inflation, deflation, unemployment – it all becomes meaningless. Once interest rates go below a certain point, the banking system ceases to function anymore. The paradox is that the Federal Reserve as bank regulator requires a certain level of highly liquid assets such as Treasuries while at the same time competes with banks to acquire these same types of liquid assets! By engaging in further quantitative easing, the Federal Reserve would crowd out the very institutions that it would like to see stockpile high quality liquid assets.

The real economic impact of the Fed’s activities is the net amount of liquidity it puts into the outstanding currency. When the effect of the Fed’s easing is circulated back to the Fed’s balance sheet through excess reserves, little economic gain is realized. This is why I cannot fathom how an additional round of quantitative easing would produce further economic benefits.

Link: Part II of video of Bullard on CNBC July 30

WallStreetWeather.net Forecast For Week Of July 25, 2010

Full Moons can be emotionally intense as the light of the Moon shines the spotlight on what we need to fully awaken to. With the Full Moon in Uranus-ruled Aquarius, there could be some shocks and surprises that seek to shake things up literally and figuratively! Since Aquarius and Uranus prefer to look ahead rather than behind, this week's Forecast will focus on the week ahead.

The Aquarius Full Moon carries similar energies to the Sagittarius Full Moon of May 27 as Jupiter’s energies are also strong now as it has just turned retrograde and is squaring Pluto. Wild and crazy Uranus is the star of the show now as the planetary ruler of the Full Moon as it opposes Saturn and Mars this week.

Volatility tends to rise when Uranus energies are strong as it increases the potential for sharp and unexpected reversals and price movements that break through support and resistance levels. With Jupiter's energies strong, these moves can be large. Monday marks the final opposition between Saturn (economic contraction/ fear/status quo) and Uranus (reform/rebellion/shocks to the system) that began on Election Day 2008. The four prior alignments occurred with Saturn in Virgo and Uranus in Pisces, signs that indicate the transition from one cycle to another as described in a post I wrote in October 2008.

During each of the prior oppositions between Saturn and Uranus, the stock market was predominately positive on the day of the opposition before falling within four weeks of the opposition. Markets dropped to multiyear lows in November 2008 over nagging fears about the values of toxic assets on banks books. In the month following the second opposition on February 5, 2009, the indices hit even lower lows over concerns about bank stress tests and calls for nationalizing banks.

The major indices hit their highest levels in nearly a year at the time of the September 15, 2009 opposition which occurred on the one year anniversary of the collapse of Lehman Brothers. Chalk it up to the expansive euphoria of Jupiter conjoining Neptune for most of 2009, reflected in the huge government stimulus and accommodative monetary policy that could have helped to keep the market buoyant as the Dow only lost about 500 points of the Dow in the weeks following the opposition.

The indices not only reached their highs for the year during the fourth opposition on April 26, but the Dow and S&P had returned to where they were in September 2008 while the NASDAQ almost reached a two year high. Fears over Eurozone sovereign debt brought the market sharply down by early May. The explosion of the Deepwater Horizon less than a week before the opposition reflects the environmental and economic damage (Saturn in earth sign Virgo) from deepwater oil drilling (Uranus in Pisces) due to a lack of safety plans (Saturn) and technology (Uranus) available to contain (Virgo) an accident.

The market could peak at this time or do something completely new during this final opposition of Saturn and Uranus as these planets have now entered cardinal signs, indicating a new cycle has begun. Saturn in Libra opposite Uranus in Aries reflects it is time for Uranus to start shaking up all the structures that have become imbalanced. For example, the government worked to clean up bank balance sheets (Saturn in Virgo) by forcing them to recapitalize. These recapitalizations together with economic stimulus measures and accommodative monetary policy helped boost the financial sector and quickly created another bubble in certain asset prices (Uranus in Pisces).

Now that the effects of the stimulus drug are starting to wear off, we are beginning to see that the economy is growing very slowly and unevenly. Until government and corporate America accept that the nation must transition from a consumer-based to a new industrial and technologically based economy (Uranus in Aries), this will contiue to largely be a jobless recovery.

Uranus/Aquarius is an extreme energy. Saturn’s opposition to Uranus can bring rebellious resistance from the status quo who would like to keep things as they are, preferring a return to how things were before the financial crisis erupted. These individuals, groups, and organizations fear (Saturn) change (Uranus) and they have tried to instill fear amongst the public that change and reform would be far worse. But when you have Mars (action), Jupiter (expansion), Saturn (structure), Uranus (innovation), and Pluto (transformation) forming challenging alignments to one another over the next month at the beginning of cardinal (initiating) signs, there is only direction to go and that is forward. And with Aquarius’ ruler Uranus in Aries the first sign of the zodiac conjoining Jupiter now, it’s time to get a move on!

All of these planetary alignments now are giving us a glimpse of a new horizon (Jupiter) coming into view. The more we resist it and cling to the past (Saturn), the longer and more difficult the transition (Pluto) will be to create the economy of the future (Uranus) that produces tangible goods and services.

Jupiter’s energies are still strong from turning retrograde on Friday as it squared Pluto in Capricorn over the weekend. Jupiter expands what it comes in contact with. While the results of the stress tests on 91 European banks turned the market around after they were released midday Friday, Jupiter/Pluto reflects that either the market’s optimistic reaction was exaggerated or its fears of the last couple months about Europe were overblown since only 7 of the 91 banks failed the test and only 1 of those banks were in Greece.

It won’t take long to find out as Jupiter squares Pluto again August 3. What Jupiter/Pluto does indicate is that the excess debt accumulated during the Pluto in Sagittarius years (1995-2008) has yet to be fully realized by the markets. The cycle of Saturn square Pluto which completes August 21 reflects the growing call for reducing government deficits.

Jupiter (greed) and Saturn (fear) squaring Pluto (debt) simultaneously reflects the market’s belief that the Federal Reserve will take interest rates lower before they go higher. A drop in rates gives greater capital appreciation to a 30 year bond than a 5 or 10 year note. That’s why there is such a huge demand for long dated Treasuries even though it makes no logical sense to hold such long dated instruments until maturity at such low rates. The speculators are playing a game of chicken with the Federal Reserve, not taking into account Bernanke’s fear of implementing further monetary stimulus.

Military tensions over nuclear issues are in the forefront as the tight square of Jupiter in Aries to Pluto in Capricorn is creating a lot of friction over the joint military exercises the U.S. is conducting with South Korea today until Wednesday following tighter U.S. sanctions against North Korea last week.

The U.S. is employing some of its biggest military equipment for the exercises, including one of the Navy’s largest nuclear-powered aircraft carriers and the F-22 Raptor fighter for the first time to counter Pyongyang’s threats of nuclear retaliation. Tuesday marks the 57th anniversary since the Armistice agreement was signed “ending” the Korean War that began during a prior opposition of Jupiter and Saturn. Jupiter and Pluto prominent over Pyongyang during the Full Moon reinforce these tensions.

With the Full Moon in Aquarius and Uranus energies accentuated, there is greater potential for flash floods, strong winds, severe thunderstorms, and tornadoes. Jupiter conjoining Uranus in fiery Aries creates excess heat. The potential for earthquakes 5.0 or greater is strong this week.

The Full Moon culminates the energies began at the New Moon of July 11 which was a Solar Eclipse. Emotions tend to run high at the Full Moon and in Aquarius they can become defiant and rebellious as the need to be free to express one’s individuality is high. The Sun in its home sign Leo harmonizing with Jupiter in Aries boosts optimism and self-confidence for taking risks. The Cancer Solar Eclipse conjoined BP CEO Tony Hayward’s progressed Sun (self-identity; career), and it appears that the Aquarius Full Moon will give him “his life back.”

Mercury in speculative Leo opposing Neptune in Aquarius reflects rumors about leaders and speculative behavior that may or may not turn out to be totally true as with Neptune there can be intent to deceive or create a false illusion. Since Neptune in Aquarius relates back to the extreme energies of Uranus, news will tend to bring an extreme reaction of euphoria or panic. Neptune rules oil, drugs, hospitals, prisons, and charities which could be prominent in the news. Certainly whatever comes out of the closet now will command the media’s full attention.

Mercury enters its home sign Virgo after hours Tuesday until October 3 (due to Mercury being retrograde August 20 to September 12). Mercury in analytical Virgo takes a critical eye in dissecting all the data to see if the numbers really add up.

The Moon will be in Neptune-ruled Pisces Wednesday through Friday reinforcing some of the themes related to Monday’s Mercury/Neptune opposition. Mercury harmonizing with Pluto Friday is good for forensic accounting or any type of tedious research.

Volatility could take a sharp spike later this week as Mars enters Libra Thursday evening until September 14. Mars the warrior who likes to be in charge is uncomfortable in Libra the sign of diplomacy and partnerships. Mars opposing Uranus Friday could create explosive events that turn the market into a rollercoaster ride, creating strong potential for the SEC’s circuit breakers to wreak havoc. Systems problems could cause disruptions in data feeds. Power outages could occur now. Geopolitical events could also create market turmoil. Mars conjoining Saturn in Libra now can put the market under pressure and block it from moving higher.

Explosions and volcanic eruptions can occur with Mars opposite Uranus. Iceland’s volcano could erupt again since the Full Moon is prominent over Iceland. Uranus rules air travel which would be affected. Mars conjoining Saturn at the same time can bring delays, obstacles and frustrations which can cause strain in all types of relationships more now. With the Moon in Mars-ruled Aries added to the mix late Friday afternoon through the weekend, tempers and tensions are quick to flare up.

Regardless of the daily forecast, the chances of intraday volatility and reversals, large moves are quite high during the next month.

Monday, July 26, 2010
Although the Saturn/Uranus opposition together with the other planetary alignments today tends to be a positive influence, there is strong potential for a reversal and/or wild intraday swings.

Tuesday, July 27, 2010
Negative bias, but could see a late day reversal.

Wednesday, July 28, 2010
Market weakens as day progresses; ends mixed to slightly positive.

Thursday, July 29, 2010
Positive bias but could become choppy/mixed to negative intraday.

Friday, July 30, 2010
Strongest early before deteriorating into what could be a sharp selloff at the close.

Related Posts:“The Record Breaking, Unprecedented and Transformative Energies of the 2010 Summer Solstice, Part I” and “Summer Solstice Part II: Economic and Financial Effects”

*A mathematical calculation that moves the planets forward in time as a method of prediction.
Tony Hayward: May 21, 1957 time unknown Eton, England

ADDENDUM (7/26/10 at 11 AM): Corrected the days of the week (Monday, July 25 was corrected to Monday, July 26 etc). Thanks go out to one of my astute readers.

Bernanke Tells Wall Street The Fed’s Hands Are Tied

Published by WallStreetWeather.net

The stock market expressed its disappointment Wednesday after Federal Reserve Chairman Ben Bernanke said at his semiannual testimony before Congress that “the economic outlook remains unusually uncertain” and failed to offer any additional actions to stimulate growth and bank lending. In their fixation over not hearing what they wanted from Bernanke, the market was missing the underlying message in his statement and testimony that foretells a major change in monetary policy is slowly underway at the Fed.

Saturn the planetary energy of economic contraction, fear, and limitations had entered Libra a few hours before Bernanke’s appearance on Capitol Hill. Libra energy can be indecisive and uncertain as to which direction to go in its quest for equilibrium. Saturn in Libra currently opposing Uranus the planetary ruler of unusual and uncertain conditions indicates the Fed has to balance Libra’s scales by weighing the economy’s slow and uneven recovery together with the risks posed by additional stimulus.

Saturn rules structures, and the very foundation of the financial system could sharply break apart (Uranus) if the Fed reduced interest rates from the 0-25% range to absolute zero. Saturn squaring Pluto (debt/lending) in Saturn-ruled Capricorn reinforces the strong potential that an absolute zero interest rate could disrupt (Uranus) any economic incentive to maintain the plumbing (Pluto) that interconnects the elements of the financial system together. As I noted in the current Weekly Forecast, money market funds which buy short term commercial paper from traditional banks would not be able to function in an absolute zero interest rate environment.

Planets entering cardinal*(initiating) signs tend to bring changes in Fed policy as cardinal signs indicate a new direction has begun. The slower the planet’s orbit, the greater and more profound these changes will be as they signify a longer term trend. The Fed is particularly affected by planets transiting the beginning of cardinal signs as its natal Pluto (secrets), Sun (self-identity/the Chairman), and Midheaven (reputation) are in the beginning degrees of cardinal signs.

Pluto rules death and transformation. Since entering Capricorn in 2008, Pluto has transformed the Fed’s scope and purpose and resulted in the near death experience of its Chairman almost not getting reconfirmed. Now as Mars, Saturn, Jupiter and Uranus converge on the Fed’s natal placements while at the same time forming challenging alignments to Pluto in the sky, the Fed is facing pressure (Saturn) to act (Mars) by taking additional actions to foster economic expansion (Jupiter) while the Fed is more focused on preparing for the future direction (Uranus) of monetary policy. The period between now and early October is a time when the Fed needs to be especially careful of how it steers monetary policy, and particularly now through August as this is when these planetary alignments will occur that also affect the Fed’s chart.

Eclipses herald major changes occurring over the next several months. The July 11 Solar Eclipse conjoined the Fed’s natal Mars in Cancer (which conjoins the Fed’s Cancer Ascendant),** a signal that the Fed is taking action to implement a slow and gradual unwinding of its balance sheet in ways it hopes will avoid triggering a negative market reaction (the Cancer-ruled Moon rules the sector of the Fed chart’s representing speculation).

First Quarter Moons tend to stir action related to issues began at the New Moon. The July 18 First Quarter Moon exactly conjoined Bernanke’s natal Mars and Neptune in Libra. Even though he might not believe he has a clear enough picture of the strength of the economy, Bernanke does not see enough evidence to tip the scales in favor of using the few (but lethal) arsenal of weapons remaining in his toolkit.

As the Moon in Sagittarius (Bernanke’s Sun sign) conjoined his natal Venus (money/banking) and Mercury in Leo opposed his progressed*** Venus in Aquarius yesterday, Bernanke’s statement and response to the Senators questions were probably his most candid ever if you were carefully reading between the lines.

Saturn in Libra squaring the Fed’s Pluto in the sector of behind the scenes activity reflects the Fed is working on slowly contracting the debt it purchased (quantitative easing). Bernanke states in his testimony: “Currently, repayments of principal from agency debt and MBS are not being reinvested, allowing the holdings of those securities to run off as the repayments are received.”

To quote Bernanke, the Fed’s “already quite stimulative” monetary policy has created a huge amount of excess liquidity in the system that banks have ploughed into two and three year debt issued by Fannie Mae (FNM) and Freddie Mac (FRE). If the Fed were to return to buying agency debt it would jeopardize crowding out the market.

On a related note, despite the rhetoric calling for “doing something” about Fannie and Freddie, any threat to the government’s implied guarantee would jeopardize the capital of the banks holding their two to three year debt. The reality is that with 9 out of 10 mortgages currently guaranteed by the two agencies, removing Fannie and Freddie from government backing would be the fastest way to kill the government subsidized housing market and take the entire world’s financial system with it.

Mars enters Libra July 29, concluding a two year cycle of action that began August 19, 2008 when the Fed took bold steps to combat the financial crisis that spiraled out of control from too many collateral calls resulting from a loss of confidence in trading partners (Libra). Combined with the transits to the natal positions in the Fed’s chart by Saturn in Libra and Uranus in Aries, the markets could act in shock as it awakens to the reality that the Fed cannot be more accommodative. Uranus exactly squaring the Fed’s Pluto the day of the August 10 FOMC meeting could be the venue for the wakeup call.

Jupiter represents economic expansion and inflation. Although Bernanke and the Fed continue to reiterate that inflation risks are low, Jupiter opposing Saturn reflects what Bernanke said in his statement that “the risks to the inflation outlook are roughly balanced.” (It should be noted that banks are tipping Libra’s scales toward inflation. Fifth Third Bank (FITB) is concerned about rising rate risk now and is unwilling to hold any mortgages in its own portfolio. Other banks such as Key Bank (KEY) are not buying agency MBS beyond 2.5 years.)

While the Fed continues to reinvest the proceeds from maturing Treasuries into new shares with similar maturities, Bernanke said in his statement that “at some point” the Fed will shift into shorter term Treasuries to gradually get its balance sheet back to pre-crisis levels. This might not be reflected immediately in the Fed’s balance sheet because they roll over higher interest rate agency securities to more current lower interest rate agency securities, reflecting an increased face value based upon the trading prices.

While Bernanke’s statement touched on running off the Fed’s balance sheet and discussing how the Fed is preparing for when it will need to remove monetary policy accommodation, no mention was made about what the Fed could still do if economic conditions became far worse than the Fed anticipates.

In questioning, Bernanke made it clear that the Fed cannot stimulate lending because the problem is a collateral issue. Bernanke discussed the Fed's three options:

1. Further define “extended period” in the FOMC statement.
2. Stop paying interest (currently at 0.25%) on excess reserves banks keep at the Fed.
3. Restart quantitative easing.

Telling the Senators that “clearly each of these options has got drawbacks and potential costs” while making no mention of any upside potential, shows Bernanke realizes taking any of these actions could cause more harm than good to the economy. Bernanke’s testimony reflects that this time the Fed is more fearful of doing more than doing less.

The consumer/housing/financial services based economy will not be revived. It will be replaced with a new industrial and technology based economy as the U.S. returns to producing tangible products and services. The cardinal planetary alignments that I have described are sowing the seeds of this transition that will unfold over the next 10 years as it experiences its birthing pains in the next 5 years.

Although in the short term there will still be plenty of toxic fallout from the old economy that will cause periods of market turmoil, before the year ends we should see evidence that the bears who believe another Great Depression is upon us and the bulls who believe the old economy can be revived are both barking up the wrong tree.

*The cardinal signs are Aries, Cancer, Libra, and Capricorn.

**The zodiac sign rising on the eastern horizon at the time the Fed came into being.

***A mathematical calculation that moves the planets forward in time as a method of prediction.

Related Posts:
“The Record Breaking, Unprecedented and Transformative Energies of the 2010 Summer Solstice, Part I” and “Summer Solstice Part II: Economic and Financial Effects”

WallStreetWeather.net Forecast For Week Of July 18, 2010

Summary Of Last Week’s Influences:
The Moon in fiery and confident Leo Monday and Tuesday kept the market’s winning streak going which began to weaken Wednesday as the Moon entered Virgo and investors began to digest the economic and earnings data and found it lacking. The major indices sold off Friday as the Moon conjoined Saturn in Virgo before moving into Libra where it set off the planetary alignment begun at the Summer Solstice.

Please see my post, “Premature Optimism For Goldman Sachs and BP” for the other major events that occurred last week as they relate to the week ahead.

Summary Of This Week’s Influences:
Events heat up related to the influences present at the July 11 Solar Eclipse at the First Quarter Moon on July 18 as the Moon in Venus-ruled Libra is 90 degrees away from the Sun in Cancer. The First Quarter Moon squares the January 15 Capricorn Solar Eclipse which conjoined Venus. The themes and people prominent then are once again the center of the action. It was at this time that the US and global markets declined over concerns about Greece’s sovereign debt which put pressure on the value of the Euro.

As mentioned in last week’s Forecast, this week will conclude with Jupiter in Aries turning retrograde while making the first of three squares to Pluto in Capricorn. (More on this in a separate post.) Jupiter rules foreign matters, and attention will be focused on the results of the stress tests conducted on 91 European banks.

Speaking of banks, the First Quarter Moon squares the USA’s natal Pluto in the sector of the USA chart ruling the financial system. The Quarter Moon also conjoins Fed Chairman Bernanke’s natal Mars and Neptune in Libra and opposes the Federal Reserve’s natal Neptune.

Bernanke will be appearing before the Senate Banking Committee Wednesday and the House Financial Services Committee on Thursday to give his semi-annual monetary policy report. If Wall St. is expecting Bernanke to hint at expanding monetary policy accommodation, they are overestimating the Fed’s influence in the current political climate.

What is not being considered is that an increase in the money supply would adversely impact the shadow banking system (Pluto) as money market funds which are already suffering from a nearly zero Fed funds rate would not be able to continue to support banks short term financing. Although this is not a bad thing as it would get backs back on the path of plain vanilla banking, it would put banks in a bind as they would have to rely on financing through bank deposits, forcing many banks to lose money by having to pay customers a higher rate of interest to obtain more customer deposits.

The Moon in Scorpio Tuesday and Wednesday further emphasizes matters related the shadow banking system such as opaque financial products, debt, taxes, corporate welfare, corruption, secrets, and insurance.

After Repulicans delayed the vote by one week, the Senate Judiciary Committee is scheduled to vote on Elena Kagan’s nomination to the Supreme Court Tuesday after Republicans and The Wall Street Journal made a fuss over Kagan not specifically stating she would recuse herself if the lawsuit lead by Florida Attorney General (and Republican gubernatorial candidate) Bill McCullum to repeal the mandate that individuals obtain health insurance in 2014 under healthcare reform is heard by the Supreme Court.

The Sun forms a stressful to alignment to Neptune (oil/deception) Tuesday as British Prime Minister David Cameron visits President Obama at the White House on the 90th day since the BP oil disaster. Cameron is expected to press the President about easing up on BP, a major UK employer and source of income for the pensioners relying on BP’s now suspended dividend. (And would Her Majesty’s government feel the same way if an American oil company caused this much damage to the UK economy and environment?)

Adding to the two leaders conversation is the growing pressure from the Senate Foreign Relations Committee which will be holding a hearing on the matter July 29 to investigate whether the UK government released the Lockerbie bomber in exchange for Libya signing a $900 million deal with BP to drill deep water wells off the Libyan coast.

International matters continue to be in focus as the Moon will be in Jupiter-ruled Sagittarius Wednesday and Thursday while Jupiter’s energies are pronounced Wednesday through Sunday as it turns retrograde on Friday until November 18. Foreign relations and trade, immigration, the courts, and publishing are some of the matters related to Jupiter.

The Moon enters Saturn-ruled Capricorn Friday and aligns with Pluto, reactivating the energies of the June 26 Lunar Eclipse which gets magnified due to Jupiter turning retrograde squaring Pluto.

Monday, July 19, 2010
Market improves as the day progresses; strongest in early afternoon. Ends negative.

Tuesday, July 20, 2010
Positive trend bias, but could become choppy/mixed intraday.

Wednesday, July 21, 2010
Negative.

Thursday, July 22, 2010
Negative conditions improve to choppy/mixed to positive.

Friday, July 23, 2010
Negative.

CORRECTION (added 7/19/10 at 11:30 AM EDT): The Moon is in Pluto-ruled Scorpio on Monday and Tuesday this week.

Premature Optimism For Goldman Sachs and BP

Published by WallStreetWeather.net

Mars represents action, and there was certainly a lot of that on July 15 as Mars in Virgo squared the USA’s natal Mars in Gemini and conjoined the USA’s Neptune in Virgo. Beyond actions involving the military and oil, transits to the USA’s Mars/Neptune alignment have coincided with major financial developments.

Since Gemini and Virgo are dualistic signs ruled by Mercury, the news came from multiple fronts: FINREG, Goldman Sachs, and the BP oil disaster. Mars squaring the USA’s Mars/Neptune square reflects the interconnectedness of these events that act to erode Neptune’s illusions where things never are as they appear to be.

As the consumer elements of FINREG are enforced, people will begin to realize lax credit standards not only pushed people further away from the American Dream of home ownership but deeper into debt they could not afford. Goldman’s settlement with the SEC is as murky as the waters of the Gulf polluted with the Neptune ruled oil and chemical dispersants from BP’s toxic disaster.

Senate Passes Financial Regulatory Reform:
Jupiter, Saturn, Uranus, and Pluto in a challenging planetary alignment in cardinal (initiating) signs now describes FINREG as the biggest expansion (Jupiter) of government regulatory (Saturn) reforms (Uranus) transforming (Pluto) the financial system since these planets formed a similar alignment during the Great Depression. These planets are and will be transiting the USA’s natal Venus (money/banking) between now and the first quarter of 2012.

The Senate passed FINREG by a vote of 60-39. The combination of Mars in perfectionist Virgo meeting the fervent idealism of the USA Mars/Neptune square, together with Saturn in Virgo exactly opposing Sen. Feingold’s natal Mercury in Neptune-ruled Pisces reflected his resistance to voting for a bill that fell short of what he believed the legislation should contain. Like healthcare reform, the Dodd-Frank Act as it’s come to be nicknamed has numerous flaws but the bill is far better than caving into the financial industry and Republican rhetoric of maintaining the status quo.

Of particular importance to the public will be who President Obama nominates to head the new consumer protection agency since the bill gives a lot of discretion to the regulators rather than prescribing specific rules and regulations that companies can find ways to circumvent. This is where industry lobbyists have shifted their attention, hopeful that since the existing regulators at the Federal Reserve, FDIC, and Treasury are the very same players who helped enable the crisis in the first place, they will continue to be sympathetic to the industry.

Republicans were against the bill; threatening it will drive up the cost of consumer credit since a key provision in the bill requires lenders must ensure a borrower’s ability to pay! Susan Collins, Olympia Snowe, and Scott Brown were the only Republicans voting for the bill. I’ve previously described why Brown’s “regular guy” driving a pickup truck is an illusion. To secure Brown’s vote, Democrats had to agree to remove a $19 billion tax on banks, bend the Volcker Rule by allowing banks to invest up to 3% of their tier one capital in hedge funds and private equity firms, and change the definition of a systemically significant firm to be based on its activities rather than its size. This is what Brown delivered in his truck to his real constituents – Fidelity Investments and State Street Corp. (STT).

FINREG passed as Jupiter in Aries is about to exactly square Pluto in Capricorn as both planets transit the USA’s natal Venus in Cancer (banking). Jupiter square Pluto indicates that not only will FINREG have worldwide ramifications, but this time around U.S. regulators are unlikely to push back at global bank capital requirements currently being formulated by the Basel Committee.

Saturn represents government and government regulations, and Saturn in its last days in Virgo since September 2007 is completing a cycle that has shown areas of the economy where accountability has become sloppy and needs to be cleaned up. Saturn entering Venus-ruled Libra July 21 until October 2012 is about structuring the financial system so the scales are less tilted in favor of Wall St. and large corporations and more balanced between commercial and consumer interests.

The passage of FINREG occurs as Mars in Virgo returns to its natal position and Saturn conjoins President Obama’s progressed* Sun in Virgo. Since President Obama’s natal Mars conjoins the USA’s Neptune in Virgo, it’s his job to clean up messes he inherited from actions taken by Congress and previous administrations, shattering the nation’s illusions (as well as his own) along the way. Mars in dualistic Virgo reflects this is his second major piece of legislative reform following Virgo-ruled healthcare. Mercury conjoining President Obama’s Leo Sun reflects the legislation will help the President’s reputation.

President Obama is scheduled to sign FINREG on Wednesday at the Ronald Reagan Building in DC. The time is unknown as of this writing but it is interesting that Saturn enters Libra at 11:09 AM EDT, signifying a new beginning in financial rules and regulations. I will elaborate more on FINREG after the President signs the legislation into law.

SEC and Goldman Sachs Settle on a “Mistake”:
After being down over 100 points around midday Thursday, the Dow and the major indices made a sharp reversal in the final 35 minutes of trading after the SEC issued a statement it would announce a “significant event” at 4:45 PM EDT. Goldman’s (GS) stock soared $6.16 to close at $145.22 as traders bet the SEC would be announcing a settlement with the firm as reported in Wednesday’s Wall Street Journal. Mercury exactly conjoining the GS incorporation chart’s progressed Sun Wednesday reflected market chatter that the news would be beneficial to the firm.

As the stock continued to rise in after hours trading, The New York Times website displayed a banner at the top of its homepage at 4:19 PM that “Goldman settles securities claim for $550 million, a person close to the deal says.” It was strange that trading in GS stock wasn’t halted until after the SEC’s press conference as stocks typically are before market moving announcements.

On the surface it might appear paradoxical that less than two hours after Congress passed financial reform that the SEC settled its April 16 fraud lawsuit against Goldman for $550 million (about two weeks worth of profits for the firm). SEC Enforcement Director Robert Khuzami was even questioned during the press conference about the timing of the announcement coming just after FINREG passed, denying there was any connection.

From a planetary perspective, FINREG and the SEC/GS settlement are definitely interconnected. Neptune rules fraud, and the SEC’s fraud charges brought against GS on April 16 spurred Democrats to clampdown even further on Wall St.’s financial alchemy (Neptune). Despite the multimillion dollar lobbying and Republican opposition, the Administration got the essence of its blueprint for regulatory reform that President Obama announced on June 17, 2009.

If approved by Judge Barbara S. Jones, the $550 million settlement seems like a lot of money to pay without “admitting or denying the allegations.” Yet the market was overjoyed that the fine was almost half what the Street expected GS would have to cough up to settle. The market was really happy that the SEC’s accusation of fraud against GS in the marketing of a CDO custom built to fail was reduced in the Consent agreement to a “mistake” in the marketing materials that GS admitted “contained incomplete information” by failing to disclose “the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson’s economic interests were adverse to CDO investors.”

Neptune in Aquarius opposing GS’ Inc. chart’s progressed Mercury in Leo and squaring its progressed Ascendant in Pluto-ruled Scorpio reflects that GS paying to make the fraud go away does not lift the fog of uncertainty surrounding the firm.

Fraud, deception, and faith – they’re all ruled by Neptune as they can all be interconnected. Neptune opposing GS’ progressed Mercury indicates that GS is taking a leap of faith by counting on the goodwill of the SEC and the government to leave them alone. Yet no such guarantees are provided in the Consent agreement. GS cannot offset this judgment against future judgments; the Justice Department could still press criminal charges.

As I wrote in a post about the lawsuit (see link above):
“Even if the SEC’s case does not succeed, the lawsuit can cause GS clients to wonder if they were deceived too. A bank’s very survival depends on trust, and as the world is all too painfully aware, so does the entire global financial system.”

GS is admitting to wrongdoing by acknowledging its “mistake.” $150 million of the settlement will go to German bank IKB who lost that amount on the CDO, and $100 million will go to the Royal Bank of Scotland (RBS). According to the FT, RBS which is majority owned by the British government, is contemplating legal action against GS to recoup the remaining $741 million it lost on the CDO (through its acquisition of ABN Amro). The planetary lineup affecting the USA’s natal Venus described earlier is affecting GS too, reflecting that profits will be reduced not only as FINREG’s rules are gradually implemented, but from additional legal costs.

Some market watchers were surprised that the SEC did not force any management changes from GS. The early October to early December period raises the potential that this could change as transits to the GS Inc chart, stock chart, and CEO Lloyd Blankfein’s chart could result in a new CEO. For Blankfein, this period will conclude with Mars in Sagittarius squaring his natal Sun in Virgo while the energies of Uranus in Pisces are pronounced as the planet turns direct** December 6 exactly opposite his Sun. An unexpected turn of events could occur pushing Blankfein to suddenly quit.

The SEC’s settlement with GS did not extend to Fabrice Tourre, the sole GS employee named in the lawsuit. Tourre is currently on paid leave from the firm’s London office and GS is paying for his legal defense. With Neptune conjoining Tourre’s progressed Sun in Aquarius through 2012, Tourre should be careful who he places his faith in as his career and reputation are on the line. Tourre’s natal Sun and Mars in Capricorn exactly oppose the GS Inc. Sun in Cancer, reflecting that GS is looking out for management’s best interests and is not out to come to the rescue of a lower level employee such as Tourre.

Tourre’s Sun/Mars exactly conjoins the USA’s natal Pluto in Capricorn located in the sector representing the financial industry in the USA chart. The SEC might believe that Tourre could be the key to unlocking the secrets regarding the “mistakes” made at this very influential firm. Unless he receives an extension from the SEC, Tourre has until July 19 to file a response to the SEC’s charges against him.

BP’s Black Hole:
90 days equates to the 90 degree square aspect. Planets squaring one another create friction, a motivating force for taking action to resolve a situation in crisis. In 90 days time the Sun has traveled 90 degrees (3 zodiac signs), squaring the Sun’s position from 90 days ago.

The SEC’s settlement with GS occurred 90 days after it was filed. Around the same time the news was leaking that a settlement announcement was imminent, BP announced the containment cap had closed off the oil leaking from the Macondo well - the 85th day since the Deepwater Horizon rig exploded on April 20.

The GS lawsuit and the oil explosion occurred just before Saturn in Virgo opposed Uranus in Pisces on April 26 for the fourth time since Election Day 2008. These energies showed a lack of safety and soundness (Saturn) in the financial system and deepwater oil drilling that was unable to withstand the unexpected shocks of the bubble bursting (Uranus in Neptune-ruled Pisces). Their regulators and the government were all too willing to look the other way as long as the money was flowing.

Mars in Virgo squaring the USA Mars/Neptune can raise optimism that actions taken to contain the oil will succeed as Mars on July 15 was opposing Jupiter in Pisces at the time of the explosion and Neptune in Aquarius returned to where it was transiting April 20.

Mars in Virgo intersecting with the Saturn/Uranus opposition at the time of the explosion will be a key test to see if things are doing as well as BP claims. Mars will oppose the Uranus degree from the April 20 explosion on July 26 which could raise the potential for explosions coming from a methane bubble escaping from under the Gulf’s floor which could trigger a gas explosion. Saturn rules pressure; Mars conjoining the April 20 placement July 28 could create problems due to a sharp drop in pressure that could cause further delays for getting the relief well in place.

At the same time Mars is transiting the explosion degree Saturn/Uranus opposition, Saturn in Libra will oppose Uranus in Aries July 26, the day after the Full Moon in Uranus-ruled Aquarius. When Mars enters Libra July 29 it will oppose Uranus July 30 and conjoin Saturn July 31. Reinforcing the planetary patterns in the sky increases the chance of an incident that could jeopardize the plans BP has formulated under the direction of the U.S. Coast Guard.

When President Bush signed the Domenici-Landrieu Gulf of Mexico Energy Security Plan on the 203rd anniversary of the Louisiana Purchase that opened up 8.3 million new acres to oil and natural gas production, the Sun (the President) and Pluto (transformation) in expansive Sagittarius was conjoining the Galactic Center of our Milky Way galaxy that contains a supermassive black hole. Mars and Jupiter conjoining in Sagittarius squaring Uranus in Pisces in this chart hinted that not only is drilling in the Gulf of Mexico an explosive political issue (Florida was exempted from the expansion), but describes an oil explosion caused by a foreign company operating in the Gulf.

BP commenced drilling on the Macondo well October 7, 2009 as Mercury and Saturn in Virgo squared the Sun/Pluto and the Galactic Center of the legislation. Mercury conjoining Saturn in Virgo in the commencement chart indicates the delays that caused the well to run behind schedule. Names have meaning, and it didn’t help that BP decided to name the well Macondo after the cursed town in Gabriel Garcia Marquez’s novel “One Hundred Years of Solitude.” In the novel, Macondo ends up being wiped off the map after a gigantic windstorm. (Uranus rules destructive winds as well as explosions; BP’s first setback with Macondo was caused by Hurricane Ida that halted drilling on November 29, 2009 for almost 90 days.) Mercury retrograde in Taurus squaring Mars in Leo on April 20 reflects the shortcuts taken to save money and the arguments that ensued resulting from those shortcuts.

Mars in Virgo will square Pluto and the Galactic Center July 23, the same day that Jupiter (the ruler of Sagittarius) energies will be pronounced as it turns retrograde in Aries. Jupiter in Mars-ruled Aries and Pluto in Capricorn are squaring each other now, reflecting that even if BP successfully kills the Macondo well over the next few weeks, there is a massive black hole of oil and chemical dispersants that is creating a dead zone in the Gulf. It could take “one hundred years” to clean up the Gulf and the surrounding land.

Mars in Virgo transiting the USA’s Mars/Neptune square just before Mars, Jupiter, Saturn, Uranus, and Pluto form challenging alignments to one other over the next few weeks indicates that the USA’s long held beliefs and illusions about financial innovation and the thirst for oil at any cost have caused more harm to our economy and environment than good. Restoring both to health will require massive structural transformation to make that bold leap to a new and sustainable economy with new technologies that will gradually dissolve our addictions to cheap and easy credit and oil and other fossil fuels.

* A mathematical calculation that moves the planets forward in time as a method of prediction.

**Planets do not really move backward but appear to from Earth’s vantage point. Uranus has been retrograde since July 5. A planet’s energy is more pronounced when from Earth’s vantage point when it appears to be motionless in the sky as it changes direction.

USA: July 4, 1776 5:10 PM LMT Philadelphia, PA
Russell Feingold: March 2, 1953 time unknown Janesville, WI
Fabrice Tourre: January 19, 1979 time unknown Paris, France
President Bush Signs Domenici-Landrieu Act: December 20, 2006 11:53 AM EST Washington, DC
BP Deepwater Horizon Explosion: April 20, 2010 9:53 PM CDT 28N45 88W23

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

The July 11, 2010 Cancer Solar Eclipse: Illusive Economic Security

Published by WallStreetWeather.net

Water is cleansing and nurturing. We cannot survive without it. A lack of water creates drought and a lack of caring. Too much water brings flooding and a tidal wave of out of control emotions.

The Moon is our emotional barometer as its cycle waxes and wanes, shifting sentiment every 2.5 days when the Moon changes signs. The Moon is at home when it transits the watery sign Cancer. Beyond our emotional needs, the Moon and Cancer represent the need for physical nurturance and sustenance. From food to nourish our bodies to shelter to protect us from the elements, the Moon and Cancer represent the importance of feeling safe and secure.

The word month is derived from the Moon. The new month really begins at the New Moon. The July 11, 2010 Cancer New Moon is a supercharged New Moon as it is a Total Solar Eclipse. As the Moon passes between the Earth and the Sun, it temporarily blocks the Sun’s light from being seen on Earth. This is why the ancients viewed eclipses as being problematic for rulers as the physical vitality of the Sun (representing leaders and men in general) is blocked by the instinctual and fluctuating energies of the Moon (representing the public and women in general).

Solar and lunar energies are in flux at the time of the eclipse as the light being blocked by the eclipse symbolizes we do not have all the information at this time to make a sound decision. This is particularly apropos to the stock market since the Sun represents speculation and the Moon represents market sentiment in general.

Eclipses are harbingers of major changes coming over the next six months; it usually isn’t until the weeks following the eclipse when things are seen in a whole new light. This tends to occur when transiting planets reach the degree of the eclipse.

As described in my posts on the Summer Solstice, the current eclipse period began at the June 26 Lunar Eclipse in Cancer’s opposite sign Capricorn which conjoined Pluto. Mars enters Libra and squares the Summer Solstice July 29, followed by Venus entering Libra August 6. This is the same day Mars in Libra will square the degree of the Lunar Eclipse. Venus squares Pluto on August 10 and squares the Lunar Eclipse the following day. Venus will square the degree of the Cancer Solar Eclipse August 26, followed by Mars on August 29. In early September Venus and Mars in Libra will square the degree of the January 15 Solar Eclipse in Capricorn, tying in the themes of this year’s eclipses together.

This marks the first time that Venus (money) and Mars (action) are transiting together in Venus-ruled Libra (relationships) since the financial crisis erupted in September 2008. Combined with the lineup of challenging planetary alignments in cardinal (initiating) signs from late July through August when Jupiter and Uranus in Aries oppose Mars and Saturn in Libra which all square Pluto in Capricorn, the eclipses and these major planetary alignments are ushering in massive changes in economic, governmental, and societal structures that extend to the roots of their very foundations.

Strong Libra energies indicate it’s time to put what has become so out of balance back into alignment. The financial contagion that spread through Wall St. the last time Venus and Mars traveled together in Libra was sparked by a crisis in confidence and collateral. No one trusted the counterparties at the other end of their toxic trades that were rapidly decreasing in value. As Venus and Mars return to Libra almost two years later, the world is still trying to uncover these complex financial relationships, along with the relationships and arrangements made between the banks and the Treasury and Federal Reserve.

The energies of the January 15 Solar and the June 26 Lunar Eclipses in Capricorn represent the transformation taking shape as we slowly shift from an economic model based on consumers and real estate (Cancer). With its Sun (self-identity), Mercury (thought process), Venus (wealth), and Jupiter (abundance/excess) in Cancer, the USA is particularly affected by these eclipses and planetary alignments.

Pluto in Capricorn opposing the USA’s Venus/Jupiter conjunction in Cancer reflects the transition from an economy overly dependent on financial “innovation” to one focused on producing tangible products and services. Pluto in Capricorn represents the mountain of government debt that will force politicians and leaders to enact sweeping reforms they would otherwise never have the stomach for.

Cancer energy is nationalistic and sentimental, tending to emotionally cling to the past because it is familiar. But as a cardinal sign ruled by the ever changing Moon, Cancer can quickly intuit the past is history. At least the public is coming around to understanding that a home is a private refuge from the elements and a place to nurture and be nurtured rather than being viewed as an ATM machine. The Solar Eclipse’s favorable aspect to Mars in Virgo is about getting back to basics by weeding out what is not only unnecessary but is actually holding you back from total physical and emotional security.

Financial markets are viewed as forward looking. Yet like Cancer the crab’s pincers, they tenaciously cling to the security of the Fed’s E-Z money for an “extended period.” Wall St. complains about the deficit and government spending, yet eagerly extends their claws out for tax cuts and more corporate welfare.

The SEC is acting as the long arm of the Federal Reserve in promoting and protecting the “wealth effect.” The SEC’s smothering could end up creating a market crash as the high frequency traders withdraw from the market in anticipation of individual stocks approaching trading curbs.

The Cancer Solar Eclipse occurs at 3:40 PM EDT. In the chart erected for that time set for Washington DC, the Solar Eclipse puts the emphasis on Pluto issues such as debt, taxes, corporate welfare, and the Administration’s mortgage programs. Global security issues such as immigration and trade are in focus. Beyond Arizona’s immigration law, the Administration could be actively involved in other court cases relating to the issues described.

Pluto rules the Solar Eclipse chart and is located in the sector representing the economy and the financial system. More secrets about the Fed’s operations will surface in Congressional hearings and document disclosures. Pluto squaring Jupiter and Uranus in the sector representing the stock market and squaring Saturn in the sector representing Congress indicates that financial regulatory reform will be signed by President Obama before this lunation cycle ends on August 9. The market believes they understand what’s in the bill since their lobbyists helped to write it, but it appears that the markets will be in shock when it passes and they wake up to some surprises not fully accounted for .

Volatility will increase as the lunar month progresses. Large and sharp market moves are likely to move in extremes, breaking through technical support levels. As the fog of illusion begins to lift, the market will head downward and likely make a new 2010 low during the latter half of the cycle (July 26 – August 6).

Uranus ruling the sector of the chart representing weather patterns and Neptune in Aquarius conjoining this sector reflects greater potential for large atmospheric disturbances with humid, wet and windy conditions. Flooding, severe thunderstorms, tornadoes, hail storms, and the potential for tropical storms/hurricanes and earthquakes is increased with the pull of the eclipse. These energies together with the Cancer eclipse themes indicate the importance of having a supply of bottled water in the event of a boil water alert, along with being prepared if a power outage occurs.

The Cancer Solar eclipse has been nicknamed an “ocean eclipse” since the majority of the eclipse path occurs over the south Pacific, running through French Polynesia, the eerie giant statues of Easter Island, and concluding at the southern edge of Chile and Argentina. Unlike people who follow eclipse paths, the ancients believed that the areas in the eclipse path would become “hot spots,” subject to all kinds of trouble resulting from geophysical and/or geopolitical conditions. The eclipse can raise the potential for tsunamis particularly in this part of the world.

Neptune conjoining the sector representing real estate and land values in the eclipse chart reflects that the water and the land along the Gulf of Mexico has already been contaminated from the oil and chemical dispersants (both ruled by Neptune). Although the market is confident that BP will stop the flow of oil in the next couple weeks, the combination of Uranus and Neptune in the eclipse chart raises the potential for another explosion. The Macondo well could ignite (Uranus) from a methane bubble (Neptune) escaping from under the ocean floor. Much that has been masked from the public about the oil disaster could surface around the time of the July 25 Aquarius Full Moon.

Neptune ruling the sector of the stock market in the eclipse chart reflects that we can bask in a false sense of security (Cancer eclipse) that the old economy addicted to consumer spending and real estate can be resurrected again. Or we can transition (Capricorn eclipse conjoining Pluto) to building a more balanced economy with new technologies that begins by creating a solid infrastructure to support it. For Wall St it means going back to the future as companies that are no longer growing will have to pay dividends to shareholders as they did in the late nineteenth century.

USA: July 4, 1776 5:10 PM LMT Philadelphia, PA

WallStreetWeather.net Forecast For Week Of July 4, 2010

In last week’s Forecast I wrote: “’Expect the unexpected’ is the mantra now. Strong Uranus energies tend to increase volatility, market reversals, and sudden breakouts through support/resistance levels.”

Last week the indices broke through the 2010 lows made on June 7 at the time Jupiter conjoined Uranus in Aries. The indices are now in a correction since their 2010 peak on April 26 when Saturn opposed Uranus for the fourth time. And they will probably enter into bear territory by the end of July as described in my two part post on the Summer Solstice.

The media was abuzz last week that the S&P is on the brink of joining the FTSE, the Nikkei and the FTSE Eurofirst 300 in a “death cross.” (When the index’s 50 day moving average drops below its 200 day moving average.) This is increasing anxiety among the chartists since a death cross has heralded four of the last two U.S. bear markets.

The death cross coincides with the cardinal cross formed at the June 26 Lunar Eclipse where the Sun in Cancer squared Jupiter and Uranus in Aries, Saturn in late Virgo (about to re-enter Libra), as the Sun and these planets formed challenging alignments to Pluto in Capricorn (death).

The Sun in Cancer completing the square of these planetary energies reflects the market turmoil as investors realize the consumer based economy that is predicated on keeping home prices propped up is dying, despite record low mortgage rates. Free marketers whine about government, yet government stimulus and the Fed’s monetary policy is what propped up the market. The problem is that the government does not want to face the fact that the US has to go through a slow and painful transition in order for an economic rebirth to occur.

The Lunar Eclipse conjoining Pluto opposing the USA Venus in Cancer reflects that the US is suffering from a collateral crisis. Pluto rules lending and no bank (Venus) will issue a loan these days to a borrower with insufficient collateral. Borrowers cannot get a mortgage or refinance if they owe more on the home that it is worth. Many small businesses are unable to get financing since the business owner’s collateral (the value of their personal residence) is insufficient to borrow against. Republicans complain about the need to “do something” about Fannie and Freddie yet the government is using the GSEs to provide financing for over 90% of US mortgages.

Pluto in Saturn-ruled Capricorn as the most powerful planet of the cardinal cross reflects the push for reducing government debt and enacting austerity measures. Notice how any spending measures passed by Congress that would provide tangible benefits to the nation such as health insurance for all become convoluted and their enactment gets delayed as they have to be “paid for.” Yet spending on the wars in Afghanistan and Iraq have bottomless budgets that are quickly and easily approved by Congress. The US has spent over $1 trillion in identifiable costs on these wars which could have went toward healthcare and infrastructure projects that would provide tangible economic security for all Americans.

Summary Of This Week’s Influences:
Rebellion that leads to revolution and independence. The winds of change that usher in reform and innovation. Awakening to freedom from perceived limitations. These are the themes symbolized by Uranus.

So it’s appropriate that as the nation celebrates Independence Day, the energies of Uranus are prominent as it turns retrograde July 5 until the December 5 New Moon in Sagittarius. The phrase “many happy returns” refers to the Solar Return. July 5 is the day of the USA’s Solar Return, when the Sun returns to the exact degree where it was the day the Declaration of Independence was signed on July 4, 1776.*

The economy and the financial system continue to be the central focus over the next year with the Sun ruling this sector of the Solar Return chart. With the Sun in the sector of behind the scenes activities ruled by Mercury-ruled Gemini and Mercury conjoining the Moon-ruled Cancer Ascendant, a lot of previously undisclosed information will be spilling out of government and corporate closets into public view. And the public will be vocal in wanting the Obama Administration to take action that will benefit the nation.

Venus in Leo in the economic/financial sector opposing Neptune in Aquarius in the sector of the chart representing debt reflects the bubble in government debt. With Uranus ruling this sector of the Return chart, the bubble in Treasurys and mortgage debt is likely to stage a sharp reversal during the next year as a lack of foreign buyers raise interest rates regardless of the Fed’s monetary policy. Venus opposite Neptune brings more cases of financial fraud and scandals involving financial companies and possibly the nation’s central bank.

Venus rules the sector representing real estate; its opposition to Neptune reflects that current home values are inflated due to banks refusing to sell their inventories of “underwater” homes at a loss. Venus opposite Neptune can also indicate that the BP oil disaster greatly reduces the value and income of “getaway” commercial and residential properties in the Gulf States, especially coastal Florida.

Uranus stationary in the sector representing foreign affairs reflects there could be an unexpected surprise concerning the expansion of the war in Afghanistan which could lead to violent protests in the US to end the war. A repeat of Vietnam?

Pluto ruling the sector representing the stock market bombarded by challenging aspects from Jupiter, Saturn, and Uranus indicates that the major averages will be much lower than they are now.

“Expect the unexpected” will continue to be the mantra this week with Uranus appearing motionless in the sky through July 11. Since Uranus turned stationary retrograde on Monday, there is a potential for a reversal from last week’s downward spiral. Add the combination of an abbreviated holiday week with a light economic calendar could continue the downward bias with choppy conditions intraday.

On Tuesday the Earth reaches its furthest distance from the Sun (aphelion) this year as the Moon is in Taurus, the first sign in the earth element. Since the Sun represents speculation and confidence, the Moon represents the mood of the market and feeling secure, and Taurus represents money/banking and wealth preservation, this could symbolize investors continuing to “de-risk” from stocks and commodities.

Taurus is the most stubborn sign of the zodiac as this fixed sign is most resistant to change. Although the Moon is well placed in Taurus it is not the ideal sign for negotiating (although a pleasant and comfortable environment with good food can help).

On Tuesday Israeli PM Netanyahu is scheduled to meet with President Obama at the White House. As the only democracy in the Middle East, Israel’s Sun in Venus-ruled Taurus squaring Mars in Leo reflects how the steadiness and determination of fixed energies are needed just to defend one’s right to exist amongst other nations eager for its demise.

With both nations born with Venus in Cancer one degree apart, there is a level of mutual understanding and shared values regarding security issues, as many Americans for religious and cultural reasons consider Israel to be their other homeland.

Like the USA, the June 26 Lunar Eclipse that conjoined Pluto also opposed Israel’s Venus. In Israel’s case, the eclipse reflects diplomatic disagreement (Venus) over the language inserted into the Nuclear Nonproliferation Treaty (Pluto). As reported in The New York Times, with the President’s emphasis on nuclear nonproliferation and forging better relations with the Arab world, the Administration agreed to demands by Arab nations to insert a clause specifically identifying Israel in the document.

While Israel has never admitted or denied it has nuclear weapons, the nuclear nonproliferation document fails to single out Iran’s nuclear ambitions. (The Lunar Eclipse conjoining Pluto coincides with Israel launching its own spy satellite so it can better monitor Iran’s nuclear program.)

With Saturn in Virgo conjoining President Obama’s progressed Sun and conjoining Israel’s progressed Mars, the President will be pressuring Israel to take action regarding negotiations with the Palestinians. While it is has been the goal of every US President since Israel’s founding to proclaim they were responsible for bringing peace to the Middle East, the first issue that needs to be addressed is who does Israel negotiate with - Hamas or Hezbollah? And how can Israel “negotiate” with a group that believes Israel does not have a right to exist?

With transiting Mercury favorably aspecting Israel’s Sun and exactly conjoining its progressed Sun in Cancer Tuesday along with Israel’s progressed Mercury conjoining President Obama’s and the USA’s natal Venus in Cancer, Israel is likely to cordially agree to disagree. Look for the Administration announcing something very trivial that Israel agreed to “negotiate.”

The Moon moving into Mercury-ruled Gemini Thursday and Friday and Mercury changing signs Friday could reflect a temporary change in market sentiment. Venus in Leo opposes Neptune in Aquarius on Thursday. Combined with Mercury in a stressful alignment with Neptune, information presented by corporate and/or government leaders could be a mirage that temporarily boosts the market out of the doldrums.

Venus last opposed Neptune on September 15, 2009. That day marked the one year anniversary of Lehman Brothers filing for bankruptcy. The indices reached their highest levels since the financial crisis broke out as Saturn in Virgo opposed Uranus in Pisces for the third time as markets were boosted by Fed Chairman Bernanke declaring “the recession was very likely over.”

Mercury moving into Leo midday Friday until July 27 could create currency shifts. Risk taking could be confined to very quick short term trades and bets on escalating volatility. Although Mercury harmonizing with Uranus can generate speculative enthusiasm along with a brainstorm of innovative ideas, there could be a last minute change in sentiment going into the weekend with Sunday’s Solar Eclipse in Cancer.

Venus enters Mercury-ruled Virgo early Saturday until August 6, ready to scrutinize every detail of quarterly earnings to determine if valuations are realistic.

Tuesday, July 6, 2010
Negative trend bias, but could be choppy/mixed, seesawing between moderately negative to positive intraday.

Wednesday, July 7, 2010
Choppy/mixed ; swings between moderately negative to positive.

Thursday, July 8, 2010
Positive.

Friday, July 9, 2010
Positive early, then becomes choppy/mixed to negative conditions by late morning. Reverts back to positive in early afternoon, but could turn choppy/mixed to negative going into the close.

*5:10 PM LT Philadelphia, PA

USA Solar Return: July 5, 2010 6:49:27 AM EDT Washington, DC
Israel: May 14, 1948 4:00 PM EET Tel Aviv