Sunday, November 23, 2008

Market Forecast -- week of November 24 - 28

Stocks markets worldwide continued their downward spiral last week amidst the growing sense that the recession will be a long and painful one. Despite Friday's impressive rally on the news of Timothy Geithner's appointment as Obama's Treasury Secretary, the Dow was off 5% for the week and closed at 8046 while the S&P stood at 800. On Thursday, the Dow retested its 2002 lows of 7400 while the S&P revisited lows set back in 1996. While I had expected a possible retest, I thought the markets might be content with Dow 8000 and then bounce back from there. I also mistakenly thought the low for the week would occur earlier, in advance of the perfecting of the Jupiter-Saturn aspect. As it turned out it was only the day the aspect perfected, Friday, that saw the market turnaround.

This market is clearly on its last legs of this phase of the bear market. With the passing of the Jupiter-Saturn aspect, the next major aspect is Saturn-Neptune. This is a more clearly malefic influence and will likely be felt with full force in December when those two planets are in their closest harmonic resonance. Despite the gloom that hangs over the market, however, there may well be enough time left for some modest gains over the next week or two, particularly in light of approach of the triple conjunction of benefics Moon, Venus and Jupiter on December 1. Nonetheless, the market is likely to be extremely volatile during this period so any gains are unlikely to last long and may be confined to intraday highs as skittishness will intensify as time goes on. It's possible the Dow could go to 9000 at some point here, but it's not anything one should put a large stake in. The Sun and Mercury conjoin on Tuesday so this may well have a hand in some optimistic trading patterns in the early part of the week.

Markets in Mumbai followed the rest of the world last week as Dalal Street saw losses of 6%. Thursday saw a retest of October's closing lows (2525/7700) but Friday's rally saved the day as the Nifty closed at 2693 and the Sensex at 8915. As the world slips deeper into recession, there will be no escape for Indian markets from December's decline. In the meantime some modest gains are possible this week but they will be fleeting. Even with the helpful Sun-Mercury conjunction on Tuesday, the Moon's transit of Scorpio, its sign of debilitation, late in the week may bring significant losses. High volatility in the next two weeks impose limits on any gains. From a longer term perspective, I am increasingly pessimistic about a market recovery in 2009. Rallies will occur and they may have considerable force, but they are very unlikely to return the market to levels seen in the first half of 2008. This is not a good time to own stocks for the long haul as it may be years before they return to 2008 levels.

With the ongoing turbulence last week, crude oil sold off sharply and even traded below $50. While some bounce back is possible this week, crude is headed lower into December, probably below $40. Gold rallied nicely last week to $800 and things continue to look quite positive for gold as the Sun transits Anuradha this week and into the early part of next week. I expect it to climb higher. The US dollar once again was the beneficiary of fear in the market as it rose against most currencies. The Euro managed to hold its own at 1.26, however, and it may gain a cent or two here before heading down sharply in December. The Rupee lost ground last week closing at 49.9 and is going to be on shaky ground for the next month or so and may trade in the 52 range.