Sunday, November 2, 2008

Market Forecast -- week of November 3 - 7

Stocks rose over 10% last week on the belief that the worst of the financial crisis has passed. In advance of the US election on Tuesday, the Dow opens trading this week at 9325 while the S&P stands at 968. While I had foreseen some midweek gains last week, I missed the strength of this rally and assumed an earlier beginning to the negative sentiment that will result from the Saturn-Uranus aspect. I grossly underestimated the positive effect of Venus entering Jyestha on the 27th while its lord Mercury was very strong. This resulted in a growth in investor confidence and pushed prices higher, albeit on fairly modest volume.

As I have indicated previously, the markets this week will be heavily influenced by the malefic t-square involving Venus, Saturn and Uranus. The Saturn-Uranus aspect is exact on Tuesday, while Venus forms tense squares with both of these slow moving malefics on Monday. It's quite a negative picture, and with the added feature of a nasty and close US election, there is a real possibility for some unexpected developments that could rattle markets. We also have Mercury in Libra now which therefore draws more negative Saturn energy from its 3rd house aspect to Libra. Moreover, Mercury will move into malefic Swati that is ruled by Rahu on Tuesday evening, just as the polls close. This suggests that the election may be a significant factor in the market.

Overall, this week looks very negative, and the only real question is how low it will go and when that low will be reached. While I think there is a genuine risk of a major 10-15% sell off like we saw in early October, there is a good chance the decline will be more modest. I think we might see the interim low towards the end of the week, but next week also looks fairly negative, especially towards Friday the 14th. A retest of 7773 is still very much in the cards here, although I am not at all certain we will get there. It may be more prudent to expect 8100-8500 this week, but much depends on how bad Monday and Tuesday are. If they are strongly negative and we get down to about 8500 by Tuesday, then a retest becomes more likely in the very near term. A retest also becomes more of a probable eventuality if something unexpected occurs with the election. In any event, this may be a good week to contemplate covering outstanding short positions. Volatility will likely spike once again as a result of the blending of Saturn and Uranus' contradictory planetary energies.

One reason why I am not certain will retest the Oct 10 lows is that some new research I've done suggests that we are more likely to see lower lows in mid-December. In fact, those are more likely to test the 2002-2003 lows of 7100 than anything we will see this week or next. Investors thinking of buying into the market for a longer duration would be well advised to wait until December.

Indian stocks put up some impressive gains as the indices rose 12%. The Sensex opens Monday at 9788 while the Nifty sits at 2885. Notwithstanding my mistaken call for last week, I am maintaining a very bearish outlook for Mumbai this week. Look for substantial losses this week with the week's lows occurring on Thursday or Friday. Transiting Sun will conjoin the NSE Rahu and come under the malefic aspect of the natal Mars on Friday while transiting Mars sits in the 12th house of loss. This is a very bearish configuration that could push prices down at least 10% for the week. There is also a chance we will retest the Oct 27 lows, although I admit I am not certain of this, as next week looks sufficiently negative that it may result in still lower levels.

As stocks advanced last week, so did most currencies against the US dollar. The Euro rose sharply and opens the week above 1.27. With the fall in stocks this week, we can expect to see most of last week's gains disappear. Transiting Mars will aspect the natal Ketu in the Euro chart. As a possible trigger, the transiting Moon will conjoin that natal Ketu on Thursday. This may well mark the largest decline on the week. I expect a low around 1.22-1.25, if not below 1.20 intraday. Other currencies like the Rupee will likely also fall in the coming week, perhaps back to the 50-51 level. Even if the US dollar rises significantly over the next two weeks, I think we won't see the high in the dollar until December.

Crude oil rebounded last week on improved economic sentiment and opens the week at $67. Look for a sell off early in the week as the Venus-Saturn-Uranus configuration activates the angles in the Futures chart. We may well be under $60 by Wednesday. I would not be surprised to see $55 this week or next.

Gold enjoyed a brief rally midweek but fell late sharply on Friday and opens Monday at $718. My bearish outlook for gold remains is unchanged as transiting Sun is still debilitated in Libra. What's worse this week is that it will come closer to the negative influence of Saturn towards the end of the week. I think we will see gold below $700 this week, perhaps well below. There is a lot of technical support at $650 so that is an obvious price target to watch for in the coming days. It may well get there over the next two weeks, but it is not certain. A more reliable low in gold will occur in December.