Saturday, December 18, 2010

Stocks edge higher; lunar eclipse due on Tuesday

Stocks edged higher last week as the Fed reaffirmed its commitment to stimulate the economy by any means necessary. The Dow closed at new highs for the year at 11,491 while the S&P500 finished at 1243. It was much the same result in Mumbai as markets rose almost 2% with the Sensex closing at 19,864 and the Nifty at 5948. While I thought we might see more downside on the Mercury-Mars conjunction early in the week, we can't be overly surprised that markets continue to rally here on the approach of the Jupiter-Uranus conjunction. The midweek aspect between the Sun and Jupiter-Uranus manifested a little early as stocks generally rose through Tuesday. The same was true for gold as it once again traded above $1400 in Tuesday's session before turning lower for the rest of the week.

So the optimism of Jupiter continues to operate in a bullish syncopation with the risk-orientation of Uranus. It is tempting to think the good times will continue all the way to their exact conjunction on January 4 2011. After all, that is in keeping with standard astrological thinking as conjunctions are most strongly felt right at the point of exactitude. But even here it is important to note that conjunctions sometimes do not act exactly as advertised. Some conjunctions peak earlier than expected due to the presence of other factors, while the effect of others last well after they are exact, as we saw with the previous Jupiter-Uranus conjunction on September 15. This not only sparked the rally off the late August bottom, but the rally continued well into November. This was perhaps due to the fact that although past exact, the retrograde motion of both planets meant that they would continue to be in close proximity (less than 3 degrees) to each other for over three months. But once the faster moving Jupiter passes Uranus on January 4, there will be no future conjunctions until 2024. So that is an argument perhaps that the upcoming conjunction may not behave as bullishly as the last one did.

As always, other facts have to be considered. One such factor is the impending eclipse period, which begins with a lunar eclipse on Tuesday, December 21. Eclipses generally occur in pairs and the accompanying solar eclipse is slated for January 4 2011. That is certainly an intriguing coincidence given that this second eclipse will fall on the same day as the Jupiter-Uranus conjunction. Eclipses are generally seen as destabilizing events which can change market direction and upset the status quo. Just as the light of the Sun is blocked or interrupted in a solar eclipse, so are prevailing trends "interrupted" by solar eclipses. That is one reason why earthquakes and volcanoes tend to cluster around eclipse periods -- there is an upset in the Earth's status quo.

Readers may recall that the previous two eclipse series were closely implicated in market reversals. In January 2010, the market topped in the US on January 19, just four days after a solar eclipse, and then tumbled more than 10% over the next three weeks. The solar eclipse followed a preceding lunar eclipse which had occurred on Dec 29. The next eclipse period happened very close to the US market bottom on July 2, as a lunar eclipse occurred on June 26 and this was followed by a solar eclipse on July 11. In light of the tendency of eclipses to reverse trends, there is additional reason to think that the current rally and underlying optimism surrounding the market may be "interrupted" quite soon. The fact that the solar eclipse falls on the same day as the completion of the Jupiter-Uranus conjunction only adds to the likelihood that changes are afoot.

Besides Tuesday's lunar eclipse, this week will see Mercury forming aspects with Uranus and Jupiter. Since all three of these planets are nominally positive energies, there is some reason to expect more upside, presumably earlier in the week when the aspects are closest. After Tuesday, however, the positive effects of these aspects will likely wane and caution may soon move in on the Venus-Saturn aspect later in the week. Sentiment is likely to get even more cautions and perhaps downright tense in the week after Christmas as Mars squares Saturn.