WallStreetWeather.net Forecast For Week Of July 17, 2011

Summary Of Last Week’s Influences:
Full Moons represent a culmination point as the Moon’s bright light shines like a spotlight to make us aware of issues demanding our full attention. Friday’s Full Moon in Capricorn brought a culmination of events illuminating the limits of fiscal and monetary policy.

Capricorn is ruled by Saturn whose infamous rings serve to maintain order within set structural boundaries. After climbing like a rocket ship approaching the Uranus station, the stock market was unable to keep the momentum last week going after Uranus turned retrograde July 9. Capricorn and Saturn are a contracting influence that tends to slow down or restrain growth. Sentiment becomes more cautious when the energies of Capricorn and Saturn are strong. Stocks tend to at least temporarily plateau with little conviction in either direction, or begin to decline in value if growth appears to be limited or stagnant.

Capricorn and Saturn rule government, corporations, regulations, and time; all themes that drove the market lower last week. Time is running out on Washington passing legislation to raise the debt limit before the government runs out of borrowing power to pay its bills. Pluto in Capricorn describes the mountain of debt here and in Europe and the call for austerity measures (Saturn!) to reduce it. Venus (money; banks) challenging Saturn in Venus-ruled Libra midweek reflected the limits of central banks and financial regulators ability to continue to prop up the economy.

European banks went through another round of “stress tests.” Just as they did the last time the Moon was in Capricorn on a Friday (Venus day), few banks failed as once again the regulators feared (Saturn!) too many hearts might stop beating if the banks were tested to see if they were healthy enough to handle the potential of a sovereign debt default.(1)

“I firmly believe that the Federal Reserve has already pressed the limits of monetary policy.” – Dallas FRB president and FOMC voting member Richard Fisher Thursday

Weeks before the Fed finished QE2, market bulls began to salivate over the prospects for QE3. They quickly zeroed in on remarks contained in the Minutes of the June 22 FOMC meeting released Tuesday that were followed up the next morning by Fed Chairman Bernanke. In his testimony before the House Financial Services Committee, Bernanke stated: "The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge, implying a need for additional policy support."

Born with his Sun in the sign of the Archer, Bernanke would never want to admit that he has exhausted his supply of arrows. With his Jupiter-ruled Sun opposite Jupiter in Gemini, Bernanke wants monetary policy to be as ultra accommodative as possible for as long as possible. Jupiter’s nature is to expand and inflate while Saturn’s energy tends to be deflationary unless supplies are limited.

All that optimism for QE3 began unraveling Thursday when the Fed Chairman appeared before the Senate Banking Committee. Sen. Richard Shelby, the Committee’s Ranking Republican, told Bernanke: “The last thing our weak economy needs right now is an inflation scare.” The Sun represents self-identity, the will, the ego, and the stock market. Sen. Shelby’s remark that“Our markets are watching to see if Chairman Bernanke has not only a credible plan, but also the will to take the difficult actions necessary to prevent inflation,” reflects that Bernanke has to prove he can master Saturn’s lessons. His reputation and how he will be remembered in the history books depends on it.

While Dallas FRB president Richard Fisher has said he would not have voted for QE2 if he had been a voting member on the FOMC last year, I think that Fisher and the other hawkish members of the FOMC allowed the policy to play out in exchange for the Fed being ready to begin an exit strategy. The June 22 Minutes outlined the Fed’s exit strategy which is virtually the same as what I outlined in an April post and a follow up post. The June and July eclipses to the Fed’s natal chart indicated that monetary policy has reached its limit.

I recommend readers take the time to read Fisher’s short speech that he gave on Thursday which succinctly sums up why additional monetary stimulus would do more harm than good. As Fisher explains, the majority of small businesses who want credit are able to access it. (And as I have previously pointed out, it doesn’t matter how low interest rates are if individuals and businesses do not qualify for loans due to insufficient collateral.)

Saturn in indecisive Libra and Venus squaring Saturn last week was aptly reflected in Bernanke’s testimony where he first outlines the factors that might warrant additional monetary stimulus, before remarking that “on the other hand” the exit strategy could get rolled out. Despite his academic expertise and a slew of staff economists at the Fed, Bernanke remains “uncertain” as to which direction the economy is headed. Friday’s report that June Core CPI was up 2.9% year over year which is well above the Fed’s 2% target limit, should put thoughts of QE3 to rest.

While most academic economists would claim both the reduction in employee payroll tax and the Fed’s easy money policies are stimulative, they could actually be working against each other. Consider the inflationary aspects of the Fed’s policies counteracting the stimulative aspects of the payroll tax reduction.

All the Fed’s efforts to stimulate growth and what Bernanke in his testimony referred to as “the portfolio reallocation effect” (reducing interest rates to nearly zero to push people into investing in riskier assets), might come undone if Congress fails to reach agreement (Saturn in Libra!) to raise the debt ceiling in time.(2) President Obama bookended the week with news conferences and as Venus squared Saturn (the elderly), the President admitted in questioning by CBS News that he could not guarantee Social Security payments will go out August 3. As the Moon went into Capricorn Wednesday, Moody’s warned it might cut the USA’s triple-A credit rating while S&P late Thursday put the U.S. debt on credit watch negative.

Jupiter and Sagittarius energy can be hypocritical, unwilling to walk the talk. Republicans bemoan the deficit yet as soon as President Obama was willing to cut the deficit by $4 trillion, Senate Minority Leader Mitch McConnell came up with a “last chance option” under Tuesday’s Sagittarius Moon. In a completely hypocritical reversal (hey, Uranus was still stationary!), McConnell’s proposal would allow President Obama to raise the debt ceiling three times between now and the end of 2012 without reducing the deficit. This would allow Republicans to vote against raising the debt ceiling three times which they believe would provide great political theatre, especially as the first vote to raise the debt ceiling would be by $700 billion which just so happens to equal TARP (which the Republican leadership - McConnell, Boehner, Cantor, and Ryan all voted for).

A debt ceiling acts as a cap which would be the equivalent of a balanced budget amendment when hit. Since Congress periodically needs to raise the debt ceiling, a balanced budget amendment is nothing but pure hypocrisy. Keep in mind that the debt ceiling spells truth (Jupiter/Sagittarius is a seeker of truth) because many expenditures are either exempt from the budget or classified as “off budget” in Congressional negotiations such as the wars. Nevertheless House Republicans plan to hold a symbolic vote Tuesday on “Cut, Cap, and Balance” (whatever that means).

Summary Of This Week’s Influences:
The debt ceiling, the European sovereign debt crisis, and corporate earnings are the major influences affecting markets this week. Mars in Gemini returning to its natal position in the USA chart Thursday and reinforcing its square to Neptune in Virgo Friday/Saturday greatly increases the potential for increased geopolitical turmoil against the U.S. and U.S. interests abroad. Since Gemini is ruled by Mercury and Mercury is in Leo, developments this week largely depends on what leaders say and do.

Monday begins with the Moon (sentiment) in Neptune-ruled Pisces until midday Wednesday. The Moon in this sensitive sign tends to view the world with rose-colored glasses or in a wave of panic believes a contagion is going to wash everything away with the tide. So many disparate indicators can create confusion and the need to sort things out using greater reliance on intuition than pure logic.

The Sun in Cancer opposing the USA’s natal Pluto in Capricorn Wednesday as the Moon moves into Aries at 12:25 PM where it will be through Friday, further emphasizes the need for Democrat and Republican leaders to reach an agreement on the debt ceiling that they can quickly pass through Congress. An agreement could be reached between government regulators and banks relating to mortgage foreclosures and modifications.

The USA’s Mars return Thursday occurring with the Moon in Mars-ruled Aries indicates that events are unfolding even faster now. Events now force the U.S. to take action to begin to cure its addiction to war, oil, drugs (legal and illegal), and the mythological concept known as “the American dream.” (If the nation keeps aspiring to a dream, then aspirations just become stuck in that state and never make the transition to becoming reality!) President Obama’s Mars exactly conjoins the USA Neptune. He can take action that works to break America’s addictions and illusions or continue to perpetuate them.

Eurozone leaders are scheduled to meet Thursday to discuss a second round of aid to Greece. Thursday is the one year anniversary of Dodd-Frank (or what I prefer to call FINREG since both politicians contributed their fair share to help the housing bubble grow). Fed Chairman Bernanke, and the leaders of the SEC, CFTC, and FDIC will testify on a hearing about FINREG on Thursday when many of the legislation’s provisions begin to take effect.

“Activations” to the USA’s Mars/Neptune square can raise the potential for financial crises as Gemini and Virgo are both ruled by Mercury and the USA’s Mercury in Cancer in the sector of debt, taxes, entitlements, and bankruptcies opposes natal Pluto in Capricorn in the sector representing the nation’s income. Venus in Cancer conjoining the USA Mercury late Friday and the USA Pluto early next week can help to create a more harmonious environment that could help to facilitate cooperation on legislation.

Monday, July 18, 2011
Negative.

Tuesday, July 19, 2011
Improving conditions as day progresses; positive bias.

Wednesday, July 20, 2011
Positive trend could weaken and reverse in afternoon.

Thursday, July 21, 2011
Negative.

Friday, July 22, 2011
Weakens as day progresses; closes mixed to negative.

(1)The results of the first stress tests on European banks were released on July 23, 2010. Jupiter was stationing retrograde that day as Jupiter squared Pluto, reflecting the results were far too optimistic and grossly underestimated the amount of intervention that would be needed.

(2) See my previous posts for more on the debt ceiling:
Fundamental Factors Impeding Employment Growth
President Obama: Don’t Count On U.S. Paying Debt Interest First
May 17, 2011 Scorpio Full Moon Over The Debt Ceiling
S&P Downgrades U.S. Outlook to Negative For Not Learning Saturn’s Lessons

2 comments:

RevJ said...

I like the new graphics

Wall Street Weather said...

Thanks, RevJ! I still have a bit more tweaking to do. One of those tweaks is figuring out how to get the back of the $ bill image next to "Wall Street Weather" in the blog header working within the confining parameters of Blogger's Awesome template. (If anyone reading this knows how to do it, please leave a Comment or email me at: deborah@wallstreetweather.net.)

Unlike our political leaders, I see RevJ that you are "Serious About Saturn." http://revjzodiacmatrix.wordpress.com/2011/06/15/serious-about-saturn/