Saturday, January 14, 2012

S&P downgrades France and most of EU

Mon Dieu! In a widely anticipated move, the credit rating agency S&P downgraded France and 8 other EU countries on Friday. The downgrade again puts the spotlight on the intractability of the debt crisis in the Eurozone. Borrowing costs are likely to rise and the integrity of the EFSF bailout fund may also be called into question as a result of the loss of France's coveted AAA rating. While markets reacted negatively to the news, the declines were fairly modest, an indication that many investors were taking a wait and see approach. Indeed, the week was mostly a positive one as Italy's closely watched bond auction earlier in the week went fairly well with short term yields falling sharply. Stocks in New York rose 1% overall closing at 12,422 while the S&P 500 finished at 1289. Indian stocks did even better as the Sensex added 2% closing at 16,154 and the Nifty at 4866. I had been somewhat uncertain about the market last week given the high number of close and potentially offsetting aspects in play. I noted how the early week entry of Venus into Aquarius would likely be bullish and US stocks climbed on both Monday and Tuesday. Indian stocks reserved their up move to Tuesday only. The late week was more subdued than I expected, however, as most markets rose into Thursday as Venus approached its conjunction with Neptune but then sold off on Friday once the conjunction was exact.

This debt downgrade is another classic manifestation of Saturn. Saturn represents debt and caution and so it is not surprising that we should these symbolisms more prominent when Saturn is very strong. As I have noted previously, Saturn's opposition aspect with Jupiter over the past several weeks has made it unusually strong. This has translated into a focus on the dangers of the EU debt levels and the necessity to reduce spending. It will be recalled that the initial EU debt scare occurred back in May 2010 when the insolvency of Greece was brought to light. At that time, Saturn was similarly strong by virtue of its opposition both Jupiter and Uranus.

Of course, stocks have managed to drift higher in recent weeks despite this most recent Saturn aspect. This is likely due to the boost that Jupiter has received from its aspect with Uranus. Now Neptune is joining the fray so we have a very rare alignment of four of the five most powerful planets. While I thought Jupiter's presence could generate some upside, I thought that Saturn's presence would cast more of shadow here than it has done thus far. Nonetheless, the alignment still has several weeks left before its constituents go on their merry ways. This means that worries over debt levels and restraint will likely continue for the near term. Perhaps the Saturn retrograde station on February 7 will correspond with a significant development. Planets are usually very strong when they are moving very slowly near their stations so we may expect more Saturnian concerns (i.e. debt, recession, austerity, pessimism) to crop up as we approach that date.

This week will feature the closest aspect between optimistic Jupiter and speculative Uranus. This bullish pairing has likely been most responsible for propping up the market recently. As these planets form an exact 30 degree angle here, it increases the probability that the market is close to some kind of top. Once these planets begin to separate, they will lose their strength. Optimism may therefore be in shorter supply thereafter. Another planet that bears close watching is Mars. It begins its retrograde cycle next week on the 23rd. Since Mars only turns retrograde once every two years, these two-month long cycles can be important. While they are bearish, they are not an infallible source of negativity. Mars energy may increase, but it is still possible that the positive side of Mars may manifest. As a result, enthusiasm, trading volume and quick decisions may be front and centre over the next few days. Nonetheless, the close proximity of two retrograde stations of Mars and Saturn, the solar systems' most malefic planets, should be cause for concern. That will coincide with a lot of negative energy. But it seems more likely that the irascible energy of Mars will stay sheathed until next week. In the meantime, we could see some weakness in the early going this week as Mercury is in aspect with Rahu on Tuesday. By midweek, the Sun enters the alignment of Jupiter and Saturn so that may boost sentiment once again for a couple of days. The late week period is more uncertain, however, as Friday's Moon-Mars aspect could cause some problems.