WallStreetWeather.net Forecast For Week Of August 1, 2011

Summary Of Last Week’s Influences:
Last week the Dow experienced its biggest decline since the week ending May 7, 2010 as the market began to become seriously concerned that Washington would fail to increase the debt ceiling by the August 2 deadline. This was coupled by concerns the economy is weakening after second quarter GDP came in at 1.3% and Q1 GDP was revised down to 0.4%. Lower than expected weekly jobless claims were not strong enough to offset the weak reading for durable goods orders. And with Core PCE on a seasonally adjusted annualized basis above the Fed’s 2% inflation target, the Federal Reserve cannot afford to stoke more inflation in a stagnant wage environment.

Summary Of This Week’s Influences:
As described in last week’s Forecast, the Sun in its home sign Leo can increase confidence and risk taking. The New Moon in Leo Saturday conjoining Venus in Leo and squaring Jupiter in Venus-ruled Taurus reflects that fiscal matters are the central focus during the next month.

The Sun squaring Jupiter is more likely to increase the motivation to take risks. Although Jupiter tends to exaggerate everything positively or negatively in a big way, this influence is more likely to bring over optimism and high expectations that leaders (Sun) are acting in ways expected to expand (Jupiter) and grow the economy.

The Moon (sentiment) moves into Mercury-ruled Virgo at 4:42 AM Monday until 6:04 AM Wednesday. The Moon in this sign is less interested in hype and more concerned with facts and figures.

When the market opens Wednesday, Mercury will have turned retrograde until August 26 as Mars moves into Cancer until September 18. Mars represents action and does not express its energies as well in the sign ruled by the ever fluctuating Moon. Mars conjoining the Summer Solstice Sun and the Fed’s natal Pluto while opposing its Sun in Capricorn, can indicate action taken by the Fed and particularly its Chairman that brings more transparency regarding the Fed’s operations. (In the event of a government shutdown over the debt ceiling, it also can represent the Fed taking action to ensure liquidity is adequate.)

These changes together with the Moon shifting into Venus-ruled Libra until Friday at 7:58 AM increase the likelihood that the market will reverse direction Wednesday. The Moon in Libra squaring Mars, opposing Uranus, and squaring Pluto taps into the energies building into next week when Mars squares Uranus (August 9) and opposes Pluto (August 11). Volatility is likely to increase as the market’s direction becomes less certain than it appeared to be at the start of the week.

The influence of Venus in Leo squaring Jupiter in Taurus late Thursday/early Friday is similar to the Sun/Jupiter influence earlier in the week. It can represent financial excess (spending exceeds income) and overpriced assets. The Moon in Scorpio could reflect the market coming around to believing that Treasuries are overpriced.

There could be an upside surprise to Friday’s employment report. While July’s nonfarm payrolls could be a bit better than the consensus estimate of 78,000, the prior month’s revision could be favorably revised upward due to a previous data or inputting error.

Monday, August 1, 2011
Positive; strongest in the morning.

Tuesday, August 2, 2011
Positive trend bias.

Wednesday, August 3, 2011
Reversal of previous trend; negative.

Thursday, August 4, 2011
Choppy to negative bias.

Friday, August 5, 2011
Strongest early but subject to an intraday reversal; mixed to positive close.

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