Sunday, May 10, 2009

Market extends rally despite Mercury Rx

Stocks stayed in rally mode last week as the bank stress test results proved to be largely a non-event amidst a backdrop of promising economic data. In New York, stocks moved up to within a few percent of their January highs, as the Dow ended 4% to the good at 8574 while the S&P stood at 929. In Mumbai, equities continued to trade above their 200-day moving average and gained over 4% as the Nifty stood at 3620 and the Sensex at 11,876. The early week gains came off as expected on the bullish Venus-Ketu-Pluto configuration but the start of the Mercury retrograde cycle did not mark a significant sell off. While Mercury retrograde is normally a bearish influence, it does not function like a malefic aspect and therefore acts as a more general influence. So while I highlighted Mercury's bearish potential last week, I was not convinced that it would have enough negative energy to counteract the Jupiter-Neptune conjunction that has fueled much of this huge run-up in the past two months. The optimism (Jupiter) and hope and idealism (Neptune) embodied in these planets has allowed a growing number of investors to look past the negatives in the economy and the long term implications of the various bailout packages and focus on the "green shoots" and hints that financial stabilization is just around the corner.

This week features another potentially negative influence for the markets as Mercury, Mars, and Saturn form a potentially tense multi-planet aspect on Tuesday or Wednesday. Any contact between Mercury and either malefic, Mars or Saturn, has the potential to move markets lower and the co-presence of both malefics with Mercury is definitely worth paying attention to. However, these aspects are not full strength aspects so we need to be skeptical about their bearish potential. In addition, Friday's entry of the Sun in sidereal Taurus may well prop up the market further since it forms a multi-planet alignment with Jupiter, Uranus, and Neptune. So even if we see some midweek selling, the end of week may see the bulls return in force. Likewise, I think there's a good chance crude will continue its winning ways, and gold also likely to stay strong here.

Saturday will see Saturn change direction from retrograde to direct so that may be a better indication of an impending reversal in the market. Readers will remember that the six-week rally off the November lows culminated in the first week of January, just a few days after Saturn changed direction and began its current retrograde cycle. Another instance of this phenomenon of planetary stations and market reversals occurred on October 11, 2007 when Mercury began its retrograde cycle, just days after world stock markets peaked. Similarly, in mid-May 2008, markets began a major down leg just one week before Mercury turned retrograde. While timing is often somewhat inexact, changes in direction of the planets can often correlate to changes in the direction of the market.