Wild, volatile, sharp reversal; confusing message. These were a few of the most frequently cited words to describe the market’s reaction following the release of the statement from the Federal Reserve’s August 9 meeting.
These words succinctly express the “as above, so below” principle in action! Whenever the energy of Uranus is strong, volatility is elevated as the market tends to behave wildly and in unexpected ways. Uranus energy likes to shock and is prone to breaking through support and resistance levels. Reversals are common when Uranus forms a challenging alignment to another planet.(1)
Mars is action and when it is strong, there is an overwhelming drive to do something NOW! Mars in Cancer triggers the shocking and intense energies of Uranus and Pluto as they form their closest square to each other this year. Their energies are a harbinger of the shocks and unexpected events that bring massive transformation as Uranus and Pluto make seven exact squares between June 2012 and March 2015.
Mars in Cancer squaring Uranus in Aries describes unexpected and impulsive action resulting from the instinctual need to create greater security. The need to protect is so strong it necessitates an urgency to break new ground and do what has never been done before. (Since Aries is ruled by Mars, aspects between Mars and Uranus in Aries become even more feverish.) Mars in Cancer about to exactly oppose Pluto in Capricorn increased the demand for action affecting interest rates and government debt. Mars operating “out-of-bounds” beyond the normal degree of planetary declination July 24 – August 22 only accentuates the rapid wild and crazy behavior of Uranus.(2)
Even before the Fed’s second round of $600 billion in Treasury purchases (“QE2”) concluded on June 30, Wall Street was already behaving like an addict who knows their fix is about to run out. Those “market participants” who know about Mercury’s retrograde cycle thought that Mercury turning retrograde August 2 would bring the return of quantitative easing.(3)
Mars moving into Cancer and harmonizing with Neptune in Pisces August 3 was another indication the market was seeking a return of their Fed-fix as a security blanket to cling to as the stock market continued its downward descent. Part of the water element, Cancer and Pisces rule the world of feelings. Surely a shot of something from the Fed would make the market feel better!
Planets entering initiating (cardinal) signs in the past have often corresponded to the Fed taking action, especially transiting Venus (monetary policy) and Mars. As Mars in Cancer conjoined the Fed’s natal Pluto, opposed its natal Sun (the Chairman), and squared the Fed’s Aries Midheaven (its reputation), the market’s demand for the Fed to act became even more aggressive.
As Mercury re-entered Leo (the sign ruling speculation) and opposed Neptune which had re-entered Aquarius (the sign ruled by Uranus) the day before the FOMC meeting, news article titles (“Fed Has Some Tricks Left, but None Are Magic” and “The Fed’s Uninspiring Options”), accurately described the opposition between Mercury retrograde and Neptune. Addictions, magic, inspiration, and illusion are part of Neptune’s domain. Interest rates at virtually zero, more than ample liquidity, and two rounds of QE have done nothing to spur economic growth and reduce unemployment, but monetary policy can take credit for two things:
1. Cheap money and QE has inflated asset prices by pushing investors into stocks and other risky assets to recreate the “wealth effect.” When people feel wealthier, they’re more likely to spend money.
2. Cheap money and QE has kept Treasury yields abnormally low which keeps the federal deficit much lower than it otherwise would have been.
After the Dow dropped 635 points August 8, the indices reversed to positive before the market opened the following day. The combination of Mars exactly squaring Uranus on the day of the FOMC meeting combined with Mars opposing Pluto together with Mercury retrograde opposing Neptune, generated rumors the Fed wouldn’t even wait until 2:15 PM to announce “QE3.”
Another factor contributing to the volatility of Mars in Cancer is that Cancer is ruled by the Moon. The Moon represents market sentiment which is always in flux as the Moon frequently aspects other planets and changes signs every 2.5 days. As described in the Weekly Forecast, the Moon was in Sagittarius. Ruled by Jupiter the largest planet in our solar system, the Moon in Sagittarius tends to correspond to big market moves to the point of excess in either direction.(4)
Having the energies of Uranus prominent increased the likelihood the market would reverse more than once in the same day. And so would the chance of the Fed doing something surprising and shocking that had never been done before. Sagittarius is symbolized by the Archer. Born with his Sun (self-identity) in Sagittarius opposing Jupiter in Gemini, Chairman Bernanke never wants to give the appearance the Fed is out of arrows.
Although the Fed’s forecasts (and mine) attempt to gauge the future, both are formulated under the planetary influences and conditions in effect at the time. While I can only speak for myself, I would say that neither forecast methodology adequately took into account the intense determination of corporate interests to destroy government regulation by providing support and funding to the most extreme conservative elements of the Republican Party to be their puppets. If it means turning a downturn/correction into a full blown bear market and the economy into a double dip recession for political gain, so be it. While both political parties have always had members advocating their party’s ideological extremes, the GOP has become a party controlled by the far out fringes who have thrown compromise, reason, and facts out the window.
Bernanke and the other dovish members of the FOMC such as Vice Chair Janet Yellen and NY FRB president William (let them eat iPads) Dudley have probably become concerned that after the debt ceiling debacle which led to the S&P downgrade, the Fed needs to act to counter the damage inflicted on the fiscal side.
After being up close to 250 points at midday Tuesday, the Dow was up just over 100 points when the FOMC statement was released. Immediately the market reversed to negative and then became choppy, before the Dow declined 200 points less than a half hour later. With Mercury retrograde opposite Neptune and the Moon Void-of-Course in Sagittarius, the market was confused and initially unable to decide what to make of the statement.
The Sun and Leo represent confidence which is needed to spur speculation. “Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee expected” is not a statement to inspire confidence. (But then again, leaving rates at virtually zero since December 2008 during the heart of the financial crisis doesn’t either.)
And it doesn’t get any better:
“The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates the unemployment rate will decline only gradually…” “Moreover, downside risks to the economic outlook have increased.” (bold emphasis mine)
Which led to the Fed’s unexpected surprise to boldly go where no FOMC has gone before (Uranus in Aries together with everything else I’ve explained!):
“The Committee currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
I continue to remind myself never to underestimate the Fed’s ability to create more ways to keep monetary policy fast and loose (especially as long as the Fed is under the leadership of Mr. Jupiter who thus far has never deviated from his archetype), “market participants” should also keep in the back of their minds what I have emboldened in the extract from the FOMC statement.
The Fed is telling us that their projection of keeping rock bottom rates until “at least mid-2013” is “likely” if economic conditions continue to unfold as the Fed “currently anticipates.” “Likely” is not a guarantee. In keeping with what we’re supposed to be doing when Mercury is retrograde, let’s return to mid-March 2008 when the NY Fed told Bear Stearns they had a reprieve of up to 28 days. While Bear Stearns and its shareholders interpreted that to mean a 28 day lifeline, then NY FRB president Timothy Geithner quickly reminded everyone that “up to” was not 28 days as the investment bank was sold off two days later to JPMorgan Chase. The Fed’s forecasts are subject to change and so is monetary policy.
Beyond the Fed stating it “will maintain its existing policy of reinvesting principal payments from its securities holdings,” the Fed’s balance sheet is not subject to the same extended period “commitment” that interest rates are. The market then sharply reversed sharply to the upside after deciding it not only liked that the Fed had extended the extended period beyond two to three meetings, but also that the Fed “discussed the range of policy tools to promote a stronger economic recovery…” and is “prepared to employ these tools as appropriate.”
PIMCO’s Bill Gross has said if you want to know what’s left in the Fed’s toolbox, re-read Bernanke’s infamous “helicopter” speech entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here” that Bernanke gave on November 21, 2002 as a member of the Fed Board of Governors. The market is fixated on a third round of QE but like any addiction, the dosage has to be higher than the previous fix in order to generate even a temporary market high. QE2 created somewhat of a political firestorm when it was formally announced last November and it is likely a QE3 would fare the same since QE2 has only increased costs for consumers.
With other potential options out of the question in the current political climate, the only other things left in the toolbox would be to purchase 10 and even 30 year Treasuries. Beyond helping speculators who have been buying these Treasuries in the hopes of “front running” the Fed for a capital gain, such a move would have virtually no economic benefit. But should demand for Fannie and Freddie mortgage bonds and securities should dry up, it is likely the Fed will pick up the slack. Maintaining low mortgage rates is a tool the Fed is unlikely to abandon.
In a post written last November I predicted that “one of the unexpected shockwaves could be a rebellion coming from within the Fed.” Three Committee members – Richard Fisher (Dallas FRB), Charles Plosser (Philadelphia FRB), and Narayana Kocherlakota (Minneapolis FRB) disagreed with extending the “extended period.” In keeping with Mercury retrograde, this was the first time there were multiple dissenters since the November 17, 1992 FOMC meeting when Mercury was …. retrograde. Mars was in Cancer then too, having made an opposition to Uranus (and Neptune) the previous month.
Since the market had such high expectations the Fed would announce QE3 at the meeting, I thought that Mars squaring Uranus together with all the other influences would give the market something unexpected – no action. That’s why I didn’t write anything beyond commenting in the Mercury retrograde post that the market shouldn’t expect Bernanke to announce QE3 at Jackson Hole on August 26. The only thing that appeared more plausible under these influences was if the Fed revived and updated the twist. (“Operation Twist” was named after the dance craze made famous by Chubby Checker in the song “The Twist.” )
Announced by JFK February 2, 1961 (six months before President Obama was born), Operation Twist sought to lower long term interest rates while keeping short term interest rates unchanged to stimulate the economy which was in a recession. (It didn’t work then either.) Venus was in Aries and Mars was in Cancer and OOB like now as both planets impacted the Fed’s natal Sun/Pluto/Midheaven then. (The Fed was experiencing a Jupiter return then which reflected intervention due to foreign exchange rate discrepancy.)
With Mercury retrograde
The Fed needs to think outside the toolbox. Instead of buying bonds, Bernanke needs to buy bridges to lower unemployment and help grow the economy! The Fed would only be able to have to set up a lending facility to support the largest infrastructure projects such as interstate highway construction or the electrical grid. Even under the guise of monetary rather than fiscal policy, I am sure a policy would not be politically palatable.
As the USA experiences its Saturn return (and Bernanke starts to experience his Saturn return in November 2012), the market and the Fed must come to terms with the fact that monetary policy is unable to help the economy at this point in time.
(1)This also includes the Sun and Moon even though they are luminaries and not planets.
(2)As mentioned in my post on Mercury retrograde (see above link), declination represents the celestial latitude of a planet (including the luminaries) north or south of the celestial equator. Any planet moving past 23 degrees 27 minutes (north or south) of its declination is considered to be “out-of-bounds” (OOB) which brings out the most extreme and eccentric behavior of that planet’s energy. For example, Venus (money/banking) was OOB May 6 – June 8, 2010. Venus going OOB reflects the planetary energy acting “Uranus-like” at that time. The May 6 “flash crash” precipitated by the European sovereign debt crisis saw the market suddenly and shockingly break through the boundaries which led the SEC to first test a new circuit breaker system June 7 in response to the flash crash to keep trading within “acceptable” boundaries.
Note that Mercury was also retrograde at the time of the May 6 flash crash (until May 11, 2010). And just as Mars began being OOB in Mercury-ruled Gemini before entering Moon-ruled Cancer August 3, Venus was transiting Mercury-ruled Gemini until May 19 when Venus entered Moon-ruled Cancer until June 14, 2010. Clearly the examples of Venus and Mars OOB in Gemini (especially when Mercury is retrograde) and Cancer further accentuates their unpredictable and fluctuating nature when operating OOB.
(3) Fed-speak for stock market participants.
(4)The USA is a Jupiter-ruled nation since Sagittarius is the sign on the Ascendant of the USA chart. The Ascendant or first sector of the chart represents the nation’s physical appearance (physical terrain as well as its people) and outlook. Jupiter conjoining Venus as well as the Sun in Cancer in the USA chart describes a nation that is eternally optimistic and far too focused on the short term.