Sunday, September 21, 2008

Market Forecast -- week of Sep 22 - 26

Global markets teetered on the brink last week as the banking crisis threatened to bring down the whole financial system. After steep early losses early in the week, the US government and Federal Reserve were compelled to intervene to stabilize the situation by bailing out the insurer AIG and injecting $700 billion into the system in an effort to restore shaken investor confidence. Markets rallied strongly Thursday and Friday and finished the week largely unchanged from Monday's open. The current situation remains extremely fragile and uncertain. My prediction two weeks ago for a significant decline on either Sep 12 or 15th was exactly on the money, as I had written that the American markets would retest their previous July lows at this time. This is exactly what happened as Monday's decline on the Dow broke through the all-important 11,000 level and Wednesday's close of 10,600 was even lower than the January low. Similarly the S&P breached the significant 1200 support level formed by the July low on Monday and hit 1150 on Wednesday. The Dow ended Friday's session at 11,388 while the S&P closed at 1255. While the strength of the late week rally was a little surprising to me, I did expect some gains later in the week.

Despite the astonishing recovery in the markets, my fundamental prediction for lower prices in the near term has not changed. This week looks mostly negative as the Sun-Pluto square perfects on Monday suggesting the possibility of a down day. Tuesday may see a bounce but we may end up testing 11,000 and 1200 at some point this week. Mars will conjoin the slowing Mercury on Tuesday and Mercury will turn retrograde on Wednesday so that is unlikely to help matters. A 2-3% decline is possible there, probably on Wednesday. I think Friday looks negative also, however and the following Monday the 29th looks even worse, so that could be another a new significant move down below 10,500 and 1150. We may see a 5% decline on Monday the 29th. This is going to get ugly very quickly. By mid-October, we could be below 9000 on the Dow. So what I'm predicting here is something akin to a crash. I'm not certain there will be a single, one day capitulation but perhaps instead a series of smaller drops. However, October 6-10 does look worse than most other time windows here, so if a crash occurs, it would most likely be then. One can't help but paraphrase the Prince song, 'we're going to party like it's 1929...'

Mumbai is coming off a similarly roller coaster week as the Sensex opens at 14,042 and the Nifty at 4245. After the predicted early week losses pushed indices down sharply, markets rallied on improved sentiment. My prediction that previous lows would not be breached was largely correct as the Nifty only got down to 3915. Monday will see the catch up rally, but the mood should darken after that. Hard to say if the week will finish up overall -- much depends on how negative the Mercury retrograde station is. What's particularly troubling about this Mercury-Mars conjunction is that it occurs exactly conjunction the natal Mercury of the NSE chart. This seems very disruptive, and may indicate substantial declines. I would not bank on any substantial gains after Monday. The following Monday the 29th looks quite grave, so we can expect the old lows to be knocked out by next week at the latest. That will mean 3800 on the Nifty and 12,500 on the Sensex. After that, I think there will be at least another 10% decline in early October. Buckle up.

Tokyo also got caught up in the financial vortex as the Nikkei closed lower and ended the week at 11,920, despite a huge rally on Friday. As predicted, the early week losses did break through the March lows as the index sank as low as 11,500. After a rally Monday, next week will see further erosion on the downside. The next support level is 11,000 which dates back to 2005 and that will be in jeopardy by the 29th. Transiting Saturn is applying to square the natal Mercury in the TSE chart over the next couple of weeks, so it's clear that Tokyo is headed much lower.

Shanghai also did not escape the market turmoil last week and did indeed break well below the 2000 level on the SSE as we predicted. It finished the week mostly unchanged and opens trading Monday at 2075. As a result of the chaos, the Bank of China changed some key trading rules, so it's possible that declines will be more modest this week than on other bourses. Nonetheless, the Mercury-Mars conjunction occurs very close to the Part of Fortune in the SSE chart, so it seems that Shanghai will follow other world markets lower. I think it will close below 2000 by week's end. By the second week of October, it may be close to 1600.

The Euro had a strong week as it gained 3 cents to finish at 1.4474. While I did not foresee this move up, I am maintaining my bearish stance as this week looks more clearly negative. The transiting Sun is moving away from the natal ascendant, while Mercury and Mars transit close to the aspect of natal Ketu. We will likely see 1.40 again by week's end or by next Monday at the latest. With all of these US government bailouts, the Fed may be forced to raise rates to defend the dollar which would spell disaster for the Euro.

Oil finished the week strong, as crude futures closed Friday above $104. While I did expect to see some upside above $100 last week, I thought prices would generally be weaker as the trend is to the downside. There is a chance for some modest short term gains this week, but the planets looks generally more bearish as the week progresses as transiting Venus conjoins the natal Saturn in the Futures chart on Friday. We could see $90 again over the next two weeks with the price continuing to fall through October back to $80 or below.

Last week, I thought Gold looked "volatile" with "daily $20 moves in both directions". Quite true, but I grossly underestimated the upside potential later in the week with the approach of Venus and Mercury to the MC of the GLD chart. I thought it would rise, but nowhere near as much as it did. Gold experienced its biggest one-day rise ever as it soared $80 in a single session. Its intraday high was $900 and finally settled at $864 at the close on Friday. I think bullion is poised to rise again this week, likely to well over $900. By next Monday the 29th, it may get to $1000 as the transiting Sun conjoins the natal Jupiter in the GLD chart. I believe gold is likely to trend higher until at least mid-October and by that time we may see prices well above $1000, perhaps to $1100. Calling a top in such a turbulent and chaotic market will be difficult. Gold will not stay at those lofty levels for long, however, so I am expecting a price collapse late in October or November back to current levels or below.