Saturday, June 18, 2011

Stocks shaky on lunar eclipse; Jupiter may offer hope

Fears of a possible Greek default raised volatility last week, even if the EU eventually cobbled together another bailout package to delay the inevitable collapse of that Mediterranean nation. In New York, the Dow made new lows Wednesday but rallied by Friday closing slightly higher on the week at 12,004 while the S&P500 finished at 1271. Indian stocks were more negative, however, as the RBI boosted interest rates again to deal with its intractable inflation problem. The Sensex lost more than 2% closing at 17,870 while the Nifty ended the week at 5366.

As expected, last Wednesday's lunar eclipse did shake things up as stocks and commodities like oil and gold fell sharply at midweek. The downgrade of Greek debt, coupled with Asian central bank tightening created a pessimistic mood throughout financial markets. While the Mercury-Jupiter aspect did deliver some rebound by Friday, this rise did not occur in Mumbai where caution over domestic inflation prevailed. There is a growing sense that there will be no quick fixes for the world's economic woes. The Fed has signaled it won't launch QE3, most likely because it's between a rock and a hard place at the moment. A new round of stimulus would sink the Dollar and likely boost interest rates on Treasuries as buyers of US debt would likely demand a greater risk premium. Of course, by doing nothing, the Fed is allowing the economy to sink or swim. But high unemployment, falling house prices, and a burgeoning government debt are all acting like very heavy millstones.

It's all very Saturnian of course as the ringed planet infuses its distinct brand of gloom and fear into our collective psyche. After completing its retrograde cycle last Monday, Saturn is now moving forward, albeit very slowly. Reversals in planetary direction can often mark changes in market direction, especially when other evidence supports. Wednesday's eclipse could definitely qualify in that regard, although we still have one more to go on July 1. Eclipse periods tend to be more volatile than normal periods, and occur every six months lasting from between two to four weeks. This one began on June 1 and will last until July 1. Eclipses can coincide with reversals and declines, especially when the eclipses are afflicted by malefic planets. Saturn is considered malefic and it likely made this recent eclipse more negative. The upcoming solar eclipse on July 1 will also be quite Saturnian since Saturn will exactly square the Sun/Moon conjunction. This does not necessarily mean the market will keep falling until July 1 or beyond, however, It does mean that it increases the likelihood of more uncertainty and pessimism around that date. Whether or not it shapes the larger trend and invites a larger reversal higher depends on other factors and their relative influences.

This week looks like a mixed bag as Mercury is squared by Saturn on Tuesday. There is also an alignment of Sun, Mars and Neptune on Tuesday and Wednesday that could correspond to some additional anxiety. I would therefore expect the first half of the week to be more bearish, with a chance of a nasty decline. On the other side of the cosmic ledger, we can see that Jupiter may be increasing its profile here. Jupiter tends to be bullish in its effects and its approaching aspect with Uranus will be highlighted by its contact with the Sun on Friday. That should increase the odds of some kind gain towards the end of the week. Where the market ends up overall is harder to say, although it is possible we could finish close to current levels.