Summary Of Last Week’s Influences:
Far from being a less volatile week, last week’s market actions propelled the major indices to experience their biggest declines over a four week period since their “Jupiter cycle” lows of early March 2009. In the last four weeks, the DJIA has erased 1,863.51 points, while the S&P has declined 17.6% from its multiyear closing high of 1,363.61 on April 29, 2011.
Since Mercury turned retrograde August 2, current circumstances tend to remind us of incidences and people from the past. As Mercury reached the midpoint of its retrograde cycle last week, several correlations have been made linking the market’s current behavior to events from the most tumultuous times of the financial crisis. Concerns that European banks operating in the U.S. lack sufficient capital to adequately conduct their daily operations here has created fears of contagion and talk of a repeat of the 2008 financial crisis. Thursday’s Wall Street Journal story on the subject resulted in comparisons to the collapse of Lehman Brothers.
Before continuing any further, I think it’s important to put the market’s performance in its proper perspective. After closing at a 12 year low of 6,547.05 on March 9, 2009, the Dow gained 6,263.49 points or 96% to its 12,810.54 closing high on April 29. The S&P gained an astounding 102%/688.03 points, from 676.53 to its April 29 close at 1,364.56. Even investors who entered the market halfway through this rocket ride rally who bought shares in the ETFs of the DJIA (DIA) or the S&P500 (SPY) would have had gains nothing short of spectacular over such a short period of time (in addition to collecting a decent dividend).
At 12,810.54 and 1,364.56 respectively, the Dow and S&P had regained close to 90% of their all-time record highs (14,164.53/1,565.15) of October 9, 2007.(1) But as this Mercury retrograde cycle “lifts the veil of illusion” (click Mercury retrograde link above), the market is waking up to the realization that trying to justify current share prices based on current interest rates is like attempting to compare apples to oranges.
The 2007 record high was based on the foundation of a robust economy (even though hairline cracks were beginning to show through a supposedly solid foundation). This year’s market high is based on the foundation of artificially low interest rates and a poor economy. Zero interest rates combined with fiscal belt tightening as the economy is weakening does not bode well for financial markets.
The only catalyst for the market now is the dream of a brighter future. Although the Fed’s ultra loose policy accommodation is helping to maintain a “floor” for the market by pushing investors into stocks and other risky assets, the Fed is simultaneously destroying the dream of a brighter future. By keeping interest rates at zero since December 2008 and announcing August 9 it is “likely” rates could remain at their current level until at least mid-2013, monetary policy is actually destroying the dream of a brighter future.
The Fed is sending a negative message that economic conditions haven’t improved one iota since the depths of the financial crisis and are not about to anytime soon. Instead of the Fed’s “pledge” providing what the Committee believes to be economic comfort, is having the exact opposite effect as businesses and consumers will only further delay hiring and making major purchases if they believe these rock bottom rates will be around for an “extended extended period.” Rather than talking about needing a further rescue by the Fed, the market needs to be rescued from the Fed! If the economy is not as bad as it was during the darkest days of the financial crisis, the improvement should be reflected by a gradual increase in interest rates and reduction in the Fed’s balance sheet as securities mature.
On the fiscal side, the debt ceiling debacle has damaged the economy by eroding confidence.
There is so much resentment toward Standard & Poor’s for downgrading the USA’s long-term credit rating. Yet just because the messenger was one of the cast of characters contributing to the financial crisis does not justify ignoring the message. It just shows that the USA is resisting Saturn’s lessons which become more difficult the longer they are ignored. (See “Debt Deal and Debt Downgrade Highlights the USA’s Fiscal Imbalances at its Saturn Return” for more information.) More messengers have emerged with warnings. Moody’s Analytics (a Moody’s subsidiary), downgraded its near-term growth outlook for the U.S. which it primarily attributed to the debt ceiling debacle. Chief Economist Mark Zandi said lawmakers must “get it together” to avoid recession. Fitch is waiting in the wings to lower the USA’s outlook from stable to negative if the new debt deal “super committee” fails to reach agreement on how they will cut $1.5 trillion from the deficit.
The USA was born with Saturn in Libra. As the nation undergoes its eighth Saturn return now (exact August 28), the government (Saturn) must cooperate (Libra) to put the nation’s fiscal house in order in a balanced way to benefit the good of the nation as a whole. The nation is waking up to the realization of the limits of fiscal and monetary policy. Saturn rules time and therefore history; past economic recoveries have depended on construction together with the lifting of asset prices to drag us out of the dumps. Having run out of every piece of ammunition to boost the economy following the burst of the Nasdaq bubble and the 9/11terrorist attacks, the Fed resorted to the nuclear option, using the power of collateral through housing to expand credit to dangerous levels.
Fed Chairman Ben Bernanke views Japan’s lost decade as the result of policies that were not fast and aggressive enough. As I have described many times, with his Sun in Jupiter-ruled Sagittarius opposing Jupiter in Mercury-ruled Gemini, together with Mercury and Venus in Sagittarius, Chairman Bernanke views the danger of under reacting to be greater than Jupiter's overreacting to the point of excess. Bernanke is considered to be a scholar of the Great Depression, and it appears the U.S. is paralleling the 1930s rather than Japan in the 1990s. He believes the Fed tightened too soon then; now economic conditions could retrench as the Fed keeps policy too low for too long.
The stock market collapse in October 1929 was followed by a rapid reversal on the hope the country could enter into a period of austerity while the economy recovered. By July 1932, the economy and the stock market had relapsed. Now the market could be repeating the same timeline. Uranus is in Aries for the first time since the 1930s, bringing a return to the extreme heat and drought. Pluto in Cancer only accentuated the geophysical and economic extreme from boom to bust. Pluto has been in Cancer’s opposite sign Capricorn since 2008 and now is the first time since the 1930s that Uranus and Pluto are making a challenging alignment to each other which will be exact during 2012-2015.
What makes this period worse than the 1930s is that we cannot count on construction bailing us out. The nation’s debt level (Pluto) wasn’t what it is now, and none of this was happening as the nation undergoes a Saturn return. Saturn in its home sign Capricorn was squaring Uranus in Aries and opposing Pluto in Cancer during the early 1930s. The nation literally dug itself out of the depths of the economic crisis through structural (Saturn) endeavors sponsored by the government (Saturn/Capricorn). New endeavors (Uranus in Aries) such as Social Security, FDIC insurance on bank deposits, and investor protections were enacted to create a basic social safety net for the general public (Pluto in nurturing Cancer).
While monetary policy has reached its limits, the lesson learned from the 1930s is that public works projects put people back to work while improving the nation’s infrastructure which benefitted the economy and the entire nation.
The return of “merger Monday” brought an overreaction to the upside on the news that Google (GOOG) will buy Motorola Mobility (MMI) for $12.5 billion. I interpret the excitement over acquiring patents and “patent wars” as a signal that innovation is slowing and the market is saturated. Increased M&A activity is a sign that companies must acquire as they’re having trouble growing fast enough organically. Zero interest rates fuels M&A activity which in turn reduces innovation while increasing unemployment. To further elaborate on footnote (1), telecom comprised part of the 1990s tech bubble which resulted from the breakup of the MaBell during the 1980s. Now telecom’s consolidation of power is working against economic growth!
The market had already reversed back to negative Tuesday by the time the Sun in Leo exactly conjoined Mercury and Venus as the two planets conjoined each other. Not only did evidence point to growth in the Eurozone slowing down, but Germany’s GDP at 0.1% in the second quarter came in lower than the Eurozone overall. No country is exempt from economic contraction when Saturn impacts a country’s natal Sun (the heart and life force). As Saturn recently conjoined Germany’s (and China’s) natal Suns in Libra and impact natal Uranus (shocks/surprises; upheavals), Uranus and Pluto are making challenging alignments to other key planets in their charts. And since China and Germany are not exempt from economic contraction, that puts additional pressure on the U.S. economy.
At the same time growth is slowing, higher costs are exerting additional pressures on growth. U.S. producer prices in July were up 7.6% year/year. At 2.5%, Core PPI was the highest since June 2009. Mars in Cancer aspecting Jupiter in Taurus at the time PPI and CPI for July was released last week reflected an increase in the cost of goods and services. Consumer prices increased 0.5% or 3.6% year/year. Core CPI is running at 1.8% year over year near the upper end of the Fed’s target range. Indeed, core CPI is double what it was when Bernanke gave his speech in Jackson Hole last August. Mars in Cancer reflects the cost of food and shelter remains elevated and is not “transitory.” Mortgage rates are at record lows, yet the cost to maintain a home or to rent continues to rise.
Mars in Cancer conjoined the degree of the July 1 Solar Eclipse Tuesday, sparking a rapid selloff after the meeting between President Sarkozy and PM Merkel failed to meet the market’s hopes for a “big bang.” The market had hoped the two leaders would announce a plan to create Eurobonds, but with Mercury retrograde, they reintroduced a financial transaction tax which was rejected in 2010.
The Sun conjoining Mercury and Venus in Leo describes what leaders (Sun/Leo) say (Mercury) about fiscal and monetary matters (Venus). Mercury conjoining Venus tends to indicate that communications are pleasant and upbeat. Like the market, I had high hopes these energies could tone down the discord. At its highest potential these energies indicate that people – especially leaders – need to communicate with words that can heal rather than hurt.
The Sun/Mercury/Venus influence reflects comments made about or by central bankers. But there was nothing pleasant about Texas Governor and Republican presidential candidate Rick Perry’s remarks about Chairman Bernanke:
“If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. I mean printing more money to play politics at this particular time in American history is almost treacherous er treasonous in my opinion.”
Long time readers of this blog know how much I intensly disagree with monetary policy and the reappointment of Ben Bernanke as Fed Chairman. But to say I found it deeply disturbing that the leader of a state thought nothing of making a veiled threat against the Fed Chairman would be an understatement. And the fact that Gov. Perry is not publicly apologizing that his “treasonous” remarks were a mistake was even more disturbing. Disagreements over policy and ideology must be expressed in a respectful manner and not as a personal attack/threat. Saturn in Libra can present difficulties in relating to one another, but it also reflects that those in positions of authority must adhere to a higher standard of decorum and civility.
And if Perry’s remarks about Chairman Bernanke were not enough to digest, Dallas FRB president Richard Fisher who was one of three dissenters at the August 9 FOMC meeting clearly crossed the boundaries (Saturn again!) in an interview with CNBC’s Larry Kudlow Thursday. Although the Fed is supposed to be independent, they are political. But Fisher’s remarks that “so much regulatory uncertainty” is one of the factors holding the economy back is the first time I have publicly heard a member of the Fed take a partisan political stance. Rules and regulations (Saturn) have existed for as long as governments have existed, yet somehow companies have always found ways to make a profit.
Although the indices were briefly positive on Friday, the indices closed the week at the session’s lows.
Summary Of This Week’s Influences:
Mars in Cancer squaring Saturn in Libra this week as the USA experiences its Saturn return is likely to exert more selling pressure on the market and accelerate fears that growth is slowing down.
The Last Quarter Moon in Venus-ruled Taurus occurred Sunday at 5:54 PM EDT shortly before Venus completed its sojourn in Leo and moved into Virgo until September 14. Venus switching signs can correspond to currency reversals, especially with Venus’ ruler Mercury being retrograde. Venus in Virgo together with the Sun entering Virgo Tuesday morning and next Sunday’s Virgo New Moon, can be beneficial for people looking for employment and can indicate wage increases. The Sun and Venus in Virgo is likely to increase scrutiny of asset price valuations as this sign loves to crunch the numbers.
Venus in Leo opposed Neptune in Aquarius Sunday and on Monday the Sun will oppose Neptune as the planet makes its closest approach to Earth this year. Full Moons mark a culmination point, and this is the “Full Moon” phase of the Sun/Neptune cycle that began on February 17 when the planets were conjoined in revolutionary and freedom loving Aquarius. Reflecting those energies, a “day of rage” was declared by protesters in Libya that day following the arrest of a human rights activist involved in freeing political prisoners (Neptune).
After reaching new highs at the Full Moon on February 18, the market turned bearish February 22 and Neptune-ruled oil spiked after protests erupted throughout Libya after Col. Gadhafi’s mercenaries fired on demonstrators in Tripoli. In a post written in late January I noted that “tensions could be rising in Libya” and that Gadhafi would be defeated during the three month timeframe the Summer Solstice forecast is in effect.
Mercury turned retrograde squaring Gadhafi’s Uranus/Saturn conjunction in Gemini, reversing the inroads he had made in keeping rebel forces out of Tripoli. As Mars in Cancer conjoins his progressed Jupiter as Saturn in Libra squares it this week, Gadhafi could have one brief final hurrah of freedom before his authority is curtailed. The Last Quarter Moon in Taurus rising over Tripoli reflects the public taking charge from a dictator who has stubbornly refused to accede to their wishes. Saturn conjoining Libra’s progressed Sun in October reflects the fall of the dictator who has ruled Libya since 1969.
The influence of the Sun and Venus opposing Neptune reinforces the energies of Mercury’s oppositions to Neptune (July 29 and August 8) which color the entire Mercury retrograde cycle. Rumors, false information, contagion concerns – these are the types of things that the market is reacting to now. The Moon in Mercury-ruled Gemini Monday and Tuesday only accentuates the energies of Mercury retrograde. Although I think the market will be to the downside Monday, any piece of news has the potential to cause market fluctuations in either direction amongst an atmosphere of illusion, delusion, and confusion.
The Moon enters its home sign Cancer Wednesday until midday Friday, conjoining Mars and squaring Saturn as Mars squares Saturn. This can bring selling pressure along with public anger over the cost of consumer staples and continuing contraction in home values. It also reflects the frustration banks are experiencing in cutting a deal with the government to settle claims of foreclosure fraud.
Venus in Virgo harmonizing with Pluto in Capricorn Thursday evening could bring M&A news. This together with the anticipation that the Treasury market will be a beneficiary when Fed Chairman Bernanke gives his speech at the Fed’s symposium in Jackson Hole Friday at 10:00 AM (ET), could find the market feeling more upbeat early Friday. However, the Moon in a stressful alignment to Neptune later Friday morning indicates the market might need to adjust its expectations concerning what the Fed can do at this point to make a difference beyond ensuring the financial system has adequate liquidity and is structurally sound. Here are projections of what the Golden One thinks Bernanke will say in his speech which if correct would confirm what I wrote in the Mercury retrograde post that Bernanke would not announce a QE3. As mentioned in my Fed post last week, reviving “Operation Twist” is the only potential possibility because as Goldman writes, the Fed is not going to embark on anything “unconventional.” I’ve previously written that Uranus in Aries squaring the Fed’s natal Sun and Pluto this year is one factor which indicates a reversal of policy is beginning despite what the FOMC statement said.
The Moon enters Leo at 12:09 PM Friday which could improve sentiment. Mercury turns direct at 6:03 PM EDT, just in time for the weekend and Sunday evening’s New Moon in Virgo. Any market gains made between the end of August and early September are likely to be temporary as a lot more market turbulence looks to be in store for the Autumnal Equinox and the September 27 Libra New Moon.
Monday, August 22, 2011
Negative (but potential setup for fluctuating conditions in either direction).
Tuesday, August 23, 2011
Wednesday, August 24, 2011
Choppy/mixed conditions deteriorate to negative.
Thursday, August 25, 2011
Negative; improves as the day progresses.
Friday, August 26, 2011
Positive conditions could reverse in the late morning before starting to improve again as the afternoon progresses.
(1) After closing at 2,873.65 on April 29, 2011, the Nasdaq Composite had regained 57% of its March 10, 2000 record high of 5,048.62. Uranus is the planetary ruler of technology; Saturn conjoining the Nasdaq’s natal Uranus in Libra has recently been exerting downward pressure on the tech-heavy index. Mercury turning retrograde in Virgo squaring the Nasdaq’s natal Jupiter and Neptune in Sagittarius indicates rethinking a sector that has experienced such outsized gains. Jupiter in Taurus demands tangible evidence that growth is real and not just hype. Companies that fail to deliver either dividends or tangible growth will have lower valuations in the current economic environment.