Saturday, December 4, 2010

Stocks rise on Mercury-Venus

Despite another disappointing US employment report that, stocks rebounded last week as the European debt crisis showed signs of coming under control. In New York, the Dow gained 3% on the week closing at 11,382 while the S&P500 finished at 1224. It was a similar tale in Mumbai as the BSE Sensex rose 4% closing at 19,966 and the Nifty at 5992. Last week, I had noted the unreliability of Monday's Mars-Jupiter aspect. This combination was often bullish due to its symbolism of excessive risk but it seemed less conducive to gains in the current climate. While we saw gains in Asia on this aspect, much of the rest of the world was modestly lower. The midweek pairing of Mercury and Venus delivered gains more or less as expected across the board as Wednesday saw prices climb sharply. The end of the week saw an ebbing of enthusiasm, although it was nowhere near as negative as the aspects would have suggested. The proximity of Mercury with Rahu and the Mars-Uranus square seemed to portend bigger moves than what we got. Since Mercury is slowing down in advance of its retrograde cycle which begins this Friday, some of the confusion and uncertainty from this Mercury-Rahu conjunction could conceivably be protracted over several days.

The world is awash in debt these days with stimulus plans, bailouts, and of course the Fed's QE2 program of quantitative easing. The aim of all these market interventions is to restore confidence, boost demand and economic activity, and avoid losses that would otherwise result if the market was left to its own devices. These are all understandable and commendable actions and yet with each new bailout comes an increased risk of inflation and debt default. Inflation occurs because too much money is being printed relative to the amount of value produced by an economy. In an attempt to restore economic confidence in indebted companies and countries, there is a risk that inflation will devalue fiat currencies and paper money. This is the main reason why the price of gold has been rising, as it once again closed above $1400 last week, and why money has been pouring into stocks of late. With the likelihood of currency debasement down the road -- as this risk-loving Jupiter-Uranus thinking goes -- it makes more sense to be invested in the stock market. But the risk of default is also growing as the amount of outstanding debt continues to mount. As a reflection of this increasing supply of debt, yields on debt are starting to rise all over the world. This is even happening with US Treasuries despite the Fed's buy back program. If bond yields continue to rise, it will begin to set off alarm bells as the debt will become too expensive to service. The danger here is that if yields continue to rise it could start chain reaction of ever-greater borrowing to pay the interest, higher inflation, devalued currency, and ultimately economic collapse. Bailouts are often necessary, but they are not risk-free.

This week begins with Jupiter entering Pisces (actually on Sunday), a Sun-Saturn aspect and a Uranus direct station. Jupiter entering a new sign is usually a bullish indication and it is now just two degrees away from Uranus. While their exact conjunction is still four weeks away, this is background influence is bullish, albeit somewhat diffuse. However, Sun-Saturn aspects usually sap confidence so this is often a difficult influence in the short term. Gold is also susceptible here since the Sun is its planetary significator. With Uranus returning to forward motion this week, there is a greater chance for sudden developments which may change some prevailing trends. When Uranus last changed its direction on July 5, the market had formed an important low just 3 days before. The midweek period features a Venus-Pluto aspect which will eventually blend into a Mercury-Venus aspect by the end of the week. These are usually positive influences. However, Friday's close Mars-Rahu conjunction is not a bullish combination and increases the chances for uncontrolled bursts of energy, irritation and hostility. The formation of the quadruple conjunction of Rahu (distortion, greed), Pluto (power,control), Mercury (communication), and Mars (action, urgency) over the next week or two is an unusual and awkward blending of energies that does not promote stability in either the financial markets or in the geopolitical sphere.