The ECB fulfilled market expectations last week as its bond buying program offered some hope that Europe could yet contain its ongoing debt crisis. I had been fairly skeptical about the size of any major new stimulus program, so it's worth noting that Draghi did not produce the bazooka-like program that some analysts suggested with hard yield caps and the like. He remained well within the ECB's stated mandate. Moreover, the bond purchases will be sterilized and will not worsen the ECB's balance sheet. In this way, Draghi was taking a page from the Bernanke playbook as the Fed Chair's Operation Twist in 2011 similarly embarked on sterilized bond purchases rather than an outright buying program as had characterized the more ambitious QE1 and QE2.
All eyes are on Ben Bernanke and the Fed this week as many are expecting QE3 to be announced at its Thursday meeting. Friday's disappointing US jobs report has increased the likelihood for some Fed action, although it is unclear just what will be announced. Will Bernanke unleash a bazooka? Or will be attempt a more cautious and limited intervention? Or indeed will be announce anything at all? As I have suggested previously, I think a full-fledged bazooka-like QE program is quite unlikely at this point. Jupiter does not seem strong enough at the moment for such a move. That leaves the two other options. Given his recent speech at Jackson Hole and the anemic jobs report, it would be somewhat disingenuous for him not to do anything. So I suspect he will go with some kind of modest plan, perhaps limited in size and scope. More politically safe sterilized bond purchases are therefore a possible route he could take. I'm not certain what Bernanke will announce on Thursday, but I do think it is quite possible that the market reaction could be fairly tepid.
This week looks fairly bullish on paper. Monday's Sun-Mercury conjunction is often a bullish influence, albeit with some caveats. It usually signals a strong directional move, although it is less reliably bullish than aspects involving Jupiter or Venus. The main planetary aspect this week occurs on Wednesday and Thursday as the aforementioned Venus forms a nice alignment with the Uranus-Pluto aspect. This is one reason why we can expect stocks to stay fairly buoyant leading into the Fed meeting. It is perhaps no coincidence that the long-awaited iPhone 5 release occurs on Wednesday just as the Moon (people, masses) conjoins Venus (happiness, luxury) and therefore highlights this wider combination with Uranus (technology) and Pluto (corporations). This is a favourable planetary alignment that should make this a successful product. The planets at the time of the Fed announcement on Thursday are somewhat equivocal. Venus is just reaching its closest aspect while Mercury has just entered sidereal Virgo. These are very bullish indications but it doesn't leave much left over for Friday. So it is possible that the market could rise into the announcement and even extend its gains into the close. But it's harder to make that case for Friday. I would therefore not be surprised if the market showed some weakness in the aftermath of the Fed announcement.