Saturday, February 18, 2012

Stocks gain on recovery hopes; Mars threatens this week

Stocks pushed higher yet again as positive economic data suggested the US recovery was gaining steam. The market also maintained its 'no news is good news' stance about Greece as the wrangling continues behind the scenes about the latest bailout conditions. In New York, the Dow rose 1% closing at 12,949 while the S&P 500 finished at 1361, just a hair's breath away from its 2011 high. Indian stocks were even more bullish as falling inflation numbers encouraged FII inflows. The Sensex gained 3% closing at 18,289 while the Nifty ended the week at 5564.

This bullish outcome was not surprising as I noted some potentially bullish patterns in last week's post. The early week Mercury-Saturn-Neptune alignment was a possible negative, although even that was somewhat ambiguous. We did see some minor pullback on US markets on Tuesday and Wednesday but the market was quite steady overall. The absence of any significant decline set the stage for the Mercury-Jupiter aspect which took the Indian market sharply higher on Wednesday with the US following suit on Thursday.

This market still very much belongs to Jupiter. Positive numbers continue to offer upside surprises in everything from manufacturing to housing, and official inflation numbers are still low. Crude oil has again moved over the troublesome $100 threshold, however, but there is a growing consensus that the recovery is underway. But is it real or is it temporary and fake? The Fed's zero interest rate policy and massive bond buying program appears to have helped the economy somewhat but it is unclear how sustainable the recovery will be once those policies end. Ben Bernanke has asserted that these unprecedented stimulative measures will remain in place for as long as necessary. The potential problem there is that the Fed cannot keep buying bonds indefinitely. Eventually, it will incur so much debt on its balance sheet that bond yields will start to rise as foreign buyers will demand a premium to offset the risk of possible US default. The market does not seem to be anywhere near this point now, especially since Jupiter is strong and still approaching its bullish aspect with Pluto in March. As long as Jupiter remains strong, there is less likelihood that some of these negative consequences will manifest. But time is growing short. The Jupiter-Pluto aspect is exact around March 13. We could see markets move lower before that date, but it seems more likely that any large corrective move will take place after.

This week again offers the possibility of some downside. This time the planet in focus is Mars. While Saturn has so far been unable to generate much downside at all, Mars may be a different story. Mars aspects both Mercury and Venus midweek so there is a possibility of some fairly significant downside near those aspects. With markets closed Monday, it is possible we could see a reversal as soon as Tuesday. Nonetheless, I would think Wednesday and Thursday are more problematic. Some rebound is more likely at the end of the week as the Moon enters Pisces and conjoins Uranus. Friday may be more bullish in this respect, although Thursday in the US could catch some of this positive energy also.