Saturday, November 19, 2011
Markets unimpressed with new Italian PM; solar eclipse due Friday
Well, it didn't take long before the markets cast their dissenting vote on the new governments in Greece and Italy. The initial sense of relief quickly gave way to rising skepticism that the pro-austerity technocratic duo of Papademos and Monti were going to magically solve Europe's crushing debt overhang. Politicians can offer soothing sound bites but economics is where the rubber meets the road. Bond yields on Italian debt once again pushed above the critical 7% level by midweek and stocks promptly sold off. The Dow lost 3% for the week closing at 11,796 while the S&P 500 finished at 1215. It was a similar story in Mumbai as the Sensex tumbled 4% closing at 16,371 with Nifty ending the week at 4905.
This negative outcome was largely in keeping with expectations although I thought we might see more downside in the early week. The malefic tandem of Saturn and Rahu (NN) were true to form as Monday was lower across the board. Saturn's entry into sidereal Libra suggested was likely going to correlate with a rise in caution. We saw the bounce from the Mars-Jupiter arrive a little early on Tuesday in the US and that set the stage for a surprisingly bearish Sun-Saturn aspect on Thursday.
It seems that Saturn is calling the shots for now. It's perhaps not surprising that stocks are been driven by the dictates of the bond market. Since bonds are debt and Saturn symbolizes debt and loss (i.e. money owed), Saturn's grand entrance into Libra last week placed the bond vigilantes front and center. As European bond yields rise into the danger zone, the market is telling policy makers that their current plans are insufficient and the risk of default remains. As it currently stands, the EU has a credibility problem. It can only resist the logic of the market for so long before it relents. The late October agreement sounded good but was short on specifics and probably short of cash as well since Italy's debt is beyond the scope of the current EFSF bailout package. The current focus on the dangers of debt is likely to continue as Saturn approaches its opposition aspect with Jupiter over the coming weeks. The aspect is closest in early January when the two planets are separated by 178 degrees. Such opposition aspects tend to highlight tension, slow progress, and frustration.
This week marks the beginning of the bi-annual eclipse period as a partial solar eclipse occurs on Friday. This eclipse does not look especially powerful or disruptive so it may not exert any immediate influence. The close aspect between the Sun-Moon and bullish Jupiter suggests that gains are more likely late in the week. This would be in keeping with the bullish tendency near the US Thanksgiving holiday. On Wednesday, however, the deadline for the Congressional Supercommittee to cut government spending (Saturn!) arrives so we could see some nervousness ahead of that date. The early week Venus-Saturn aspect looks negative and could translate into a reluctance to buy stocks. So I would not be surprised to see some early week downside and then for gains to accrue in the second half of the week. Large moves seem more unlikely this week, however.