Monday, January 25, 2016

Oil tells all: markets take their cue from crude

(25 January 2016) Are we there yet?  Investors are wondering if this January decline might finally be done with or if this is only be a nasty prelude to a more tumultuous financial year in 2016.  My assessment of the planetary influences suggest there is a higher than normal risk of more downside in both the short and medium term. There are several useful charts in this respect but perhaps none is more important these days than the chart for crude oil futures. 

As we have seen, the stock market is currently being driven by oil prices.  If oil falls, stocks also fall soon after.  One reason for this close correlation is that oil prices have fallen so far that many oil companies are in financial trouble.  Most have laid off workers, and some are on the verge of insolvency.  In particular, some US-based companies borrowed heavily for capital-intensive shale fracking operations.  As these companies go under, they will no longer be able to repay their debt and hence the banks that loaned them money will also be in trouble.  The financial contagion will thereby be released upon a vulnerable economy.   As the world's pre-eminent commodity, crude oil prices are also seen as a proxy for the state of the global economy.  The falling prices in the oil market are signaling that the economy is slowing as China and other emerging markets cut their consumption levels amid rising debt. 

The bottom line here is that as oil goes, so goes the stock market.  If oil falls further, it seems very likely that stocks will also fall further.  A rebound in oil either through tightening supply or increasing demand, or conceivably a fall in the US Dollar would give a boost to the stock market.  So what is the price outlook for oil?

Previously, I looked at the Brent Crude Oil horoscope and found strong evidence for depressed prices in 2015, 2016 and beyond.  Not surprisingly perhaps, a quick look at the first trade horoscope for West Texas Intermediate (WTI) on the NYMEX also shows why the oil market is so weak at the moment.  As is so often the case, the planetary cause of falling prices is Saturn.  Transiting Saturn (19 Scorpio) is in a tight conjunction with Jupiter (17 Scorpio) in the 7th house of the chart opposite the Ascendant,.  Secondarily, Saturn is also conjunct nearby Uranus (15 Scorpio). 

Saturn was exactly conjunct Jupiter two weeks ago when crude oil fell through support at $35 -- a moment of maximum affliction by Saturn. While Saturn's bearish influence may be lessening to some extent since it is now past exact, it may not travel far enough away from Jupiter to make much of a difference in terms of overall trend.  Saturn is due to station retrograde at 22 Scorpio in late March and then come back and conjoin that natal Jupiter once again in June.   We could easily see another push lower then.  As the most distant of the observable planets, Saturn only moves 12 degrees per year including a four-month long retrograde period and thus its conjunctions can take many months to play out.  It therefore seems likely that Saturn's proximity to natal Jupiter will mean that oil will fall further in 2016, possibly reaching that $20 target that many analysts have highlighted.  Saturn stations direct in August at 15 Scorpio and will then conjoin that Jupiter once again in September.  As a general rule, Saturn conjunctions are bearish for prices for most assets. 

To be sure, the entirety of the collapse of oil prices since 2014 cannot be solely accounted for by the movements of Saturn. The initial price decline was also associated with Ketu (South Lunar Node) which conjoined Mars (2 Aries) in mid-2014 at the start of the decline below $100 and then later, in part, through its conjunctions with Mercury (20 Pisces) and Sun (15 Pisces).  That said, these simple transits do not account for all of the variation in the price of oil but they play a large role in determining if oil is rising, falling or going sideways. 

The near term outlook looks challenging.  Saturn may be losing some of its negativity but the planets this week argue for more downside.  The late week transit of Mars (19 Libra) opposite the natal Venus (19 Aries) in the WTI horoscope may well coincide with significant downside, especially since it also aligns with Saturn.  February could see some improvement but the gains may come in fits and starts and probably won't be enough to change the overall bearish outlook for oil.  March seems a lot more difficult as Saturn stations and begins to move back towards Jupiter again. 

Weekly Market Forecast

Stocks bounced last week as crude oil finally reversed its downturn.  US Stocks rallied 2% on the week after making a potentially significant intraday low on Wednesday while Indian stocks enjoyed a more modest gain.  While I was somewhat bearish in my bias in last week's market forecast, I was uncertain if the ongoing alignment of retrograde Mercury with Pluto, Uranus, Saturn and Mars would yield declines last week or this week. 

This week is off to a mixed start as Asian markets were somewhat higher while European stocks finished a bit lower.  US Stocks are down by less than 0.5% and crude is down by 3% as I write this post.   I still think there is a greater risk of declines this week even if we get some upside along the way.  We will see Mercury station direct later on Monday (EST) so that could change the mood of the market.  And the Mars-Saturn alignment will tighten on Thursday and Friday so that may be a more likely time when stocks will fall.  Interestingly, Fed Chair Janet Yellen is due to issue its latest policy statement on the economy on Wednesday.  For more details and a longer term forecast for February and beyond, please subscribe to my MVA Investor Newsletter.

Monday, January 18, 2016

The China Syndrome: the world's economic engine stalls

(18 January 2016) Financial markets continue to look shaky as the 'China Syndrome' threatens the global economy.  After many years of impressive economic growth, China is showing more signs that its once-powerful economic engine is sputtering. This is one of the main reasons why crude oil has fallen below $30 a barrel and most stock markets have declined so far in 2016.  As China goes, so goes the global economy.   If China is forced to further devalue its currency to boost its exports and protect jobs, we can expect more trouble for global stock markets this year.

But is China really headed for a "hard landing" whereby their economy contracts sharply or perhaps even enters a full-blown recession?  Previously, I looked at the horoscope of the Shanghai stock exchange and found ample evidence for a significant decline in January.  The main Shanghai Index is has now fallen below 3000, a key technical support level.  Some analysts are now suggesting more downside to perhaps its previous low of 2000.  My assessment of this chart suggests that more downside is very likely this year.  The Saturn retrograde station in March will align closely with the Moon this chart, while the Uranus station (0 Aries) in the summer will square the natal Saturn (0 Capricorn).

Significantly, we can see a similar pattern of affliction this year in the national chart of China (1 October 1949).  Although stock market movements are only indirectly related to the national horoscope, economic conditions are usually reflected in the chart, especially when they diverge from the norm.  This is definitely the case in 2015 and 2016 as transiting Saturn (18 Scorpio) squares its natal position in the 8th house.  Saturn in the 8th house in Leo is a very conservative influence and reflects the necessity of maintaining strict political control over that society.  Since Saturn is the ruler of the chart (since it rules the 1st house Capricorn), the sense of restriction and conservatism is even more pronounced. 

To be sure, the aspect from Jupiter indicates that China benefits greatly from this reliance of tradition and order.  The stifling of political dissent and opposition to the one-party state has forced the population to focus on building the economy as a patriotic duty.  But when transiting Saturn casts its full-strength square aspect from Scorpio to natal Saturn, even this positive Jupiter influence is likely to be overwhelmed.  Frustration and national anxiety are likely to manifest with scandals (8th house) popping up with more frequency.  Recent months has seen a series of hedge fund managers and other highly placed investors disappearing for a time, presumably to be "interviewed" by the government.  Last summer's stock market rout was deeply embarrassing to Beijing despite issuing edicts which banned short selling and forced major banks and brokerages to buy stocks in order to support prices.

The problem for China in 2016 is that Saturn will station at 22 Scorpio in March and then move backwards for the next four months.  It will thereby maintain is aspect to natal Saturn and this will likely keep the economic pressure on.  Saturn is first and foremost a restrictive influence, so all this Saturn energy will likely see the economy contract further this year.  Of course, Saturn also rules Aquarius, which is the ruler of the 2nd house of wealth in the national chart of China.  This ongoing Saturn transit will therefore likely see the net wealth of the country also decline, or possibly expand at a slower rate, at least for the duration of the transit.  The slowdown is more likely to be disruptive to society since both Uranus (22 Pisces) and Pluto (21 Sagittarius) align with the nodes, Rahu and Ketu.

I would expect China's economy to continue to struggle throughout 2016 so a hard landing looks inevitable.  We will also likely see more authoritarian actions by the government as Beijing attempts to tame the capitalist tiger.  Transiting Rahu's conjunction to natal Saturn in July will likely highlight another period of extreme instability.  Saturn's square aspect will finally begin to separate and diminish in the fall. 

Weekly Market Forecast

Stocks fell again last week as crude oil extended its slide to below $30 a barrel for the first time since 2004.  US stocks fell 2% as the Dow finished at 15,988 while markets in India  also lost more than 2% as the BSE Sensex ended the week at 24,455.   In last week's stock market forecast, I thought we might have got more gains on Thursday's Sun-Mercury-Jupiter-Rahu alignment.  Thursday was higher in the US but stocks were lower for most of the rest of the week.   As I noted, however, the presence of unpredictable Rahu (North Lunar Node) somewhat lessened the favourability of this pattern. 

This week has started off modestly negative in Asia and Europe as US markets are closed for the MLK holiday.   There are no clear planetary indications for this week although it is hard to be optimistic.  The ongoing Jupiter-Rahu conjunction is still very close this week (and next) and that may make the prospects for a rebound more unlikely.  Another source of instability could be Mercury retrograde which conjoins Pluto and aligns with Uranus late in the week.   I'm not sure it will correlate with much downside this week, however.  It's possible of course, but the problem is that Mercury will then align with planetary bad boys Mars and Saturn next week.  This alignment looks even worse so stocks could be under more pressure.  For more details on these and other alignments, please check out my subscriber newsletter.

Monday, January 11, 2016

Is 2016 going to be as bad as 2008?

(11 January 2016) Stocks fell sharply around the world last week as China's financial turmoil threatened to undermine the fragile economic recovery.  As China's devaluation of the Yuan sideswiped markets, US stocks had their worst start to the year in history falling 6% as the Dow closed at 16,346.  Indian stocks also slumped 4% as the Sensex fell below the key 25,000 level.  This outcome was in keeping with my stock forecast from last week as I thought the Mars-Mercury square aspect would likely cause some significant damage.  This was not just any old Mars-Mercury square, of course, but a particularly nasty one since Mercury turned retrograde on the very same day the 90 degree angle was exact!  Asian markets have extended their decline on Monday at this time of writing although European stocks are mixed.

To be sure, the New Year is off to a shaky start.   Is the six-year long bull market in stocks finally over?  One now reads more gloomy forecasts in the media that suggest that 2016 might even be a repeat of 2008 when the world economy came to brink of collapse.  My previous research on this subject suggests the odds are very high that most stock markets will decline significantly in 2016 and we could well see the end to this bull market in the US and Europe.  It is already over in the stock markets of many emerging economies.  This is evident in the New Year's horoscope and the annual May horoscope of the New York Stock Exchange (NYSE).  One of the most useful tools in financial astrology is the solar return chart, i.e. the horoscope that maps the position of the planets on the birthday of a stock exchange or stock index.  The NYSE 2015 Solar Return chart (Varshphal) looked quite bearish given the close Saturn-Sun square aspect.  This strongly points toward a negative performance of US stocks between May 2015 and May 2016.  The Dow hit its all-time of 18,351 just two days after its 223rd birthday on 17th May 2015.  Currently, it is still just about 10%  below that level now despite the recent turbulence.  But if my assessment of the Solar Return chart is correct, the Dow will remain well below its high by the end of the Solar Return chart in May 2016, and probably lower than its current level of 16,346 for the Dow. 

The next twelve period from May 2016 to May 2017 is also strongly pointing to more downside.  On the plus side, SR Saturn (20 Scorpio) is no longer aspecting the natal Sun (6 Taurus) but it does form a troubling alignment with both SR Mercury (20 Aries) and SR Jupiter (19 Leo).  Mercury and Jupiter are usually sources of optimism but Saturn's alignment here may effectively block that from manifesting for the next year.  And depending on the accuracy of the exact time of this chart (I use 10.10 but there are many others) and hence the Ascendant position, Saturn may also be exactly aligning with the Ascendant. 

An additional problem for this chart is that malefic Mars is closely opposite the Sun and Mercury.   Like Saturn, Mars is associated with declines especially when it aspects key planets like the Sun or Moon.  Whereas Saturn is pessimistic and depressing of sentiment, Mars is associated with fast-paced and shocking changes.  For its part, the SR Moon is aspected by disruptive Ketu.  It also aligns with the natal Mars. This increases the probability of not just a down year, but a year that will be volatile and unstable. 

Whether or not 2016 will be a repeat of the crisis of 2008 is hard to predict on the basis of this single chart.  But overall I do think there is considerable risk of a sizable decline in world markets in 2016 that is at least reminiscent of the level of financial chaos we saw eight years ago.  As Mark Twain said, "history doesn't repeat itself, but it does rhyme."

Weekly Market Forecast

Despite Monday's large decline in Chinese markets, the planets look bullish this week.  Tuesday's alignment of Venus with Uranus and Pluto is often positive for stocks and commodities and should boost sentiment early in the week.  Thursday's Sun-Mercury conjunction happens to coincide exactly with a nice aspect from Jupiter.  Although both Mercury and Jupiter are retrograde here alongside the often unpredictable Rahu, this four-planet combination still looks good. 

Once the Sun-Mercury conjunction separates late on Thursday and Friday, there may be less positive energy available, however.  Readers seeking more details and a longer term forecast may check out my subscriber investor newsletter.

Monday, January 4, 2016

Global markets decline after China's plunge stops trading

(4 January 2016)  2016 has started off on the wrong foot as global stocks declined sharply Monday following a 7% plunge in the Chinese market that triggered circuit breakers and an early closing of the Shanghai Stock Exchange.  The decline is pretty much what I expected given the very difficult planetary alignment this week.  As I briefly mentioned in last week's market forecast and elaborated more fully in my subscriber newsletter, the Mars-Mercury square aspect was more likely to correlate with declines here because it was in effect for an unusually long time due to the approach of Mercury's retrograde station on Tuesday, January 5th.  

The retrograde station is the day in which Mercury stops its normal forward motion and then begins to reverse its direction in the sky from our perspective on Earth.  The Mercury retrograde cycle occurs every three months and lasts for about 20 days.   While its retrograde cycle is traditionally associated with miscommunication and failed plans, I have found the days around its stations to be more specifically relevant to the financial markets.  If Mercury reverses its direction (i.e. stations) while making a close aspect with a malefic planets like we got last week and this week with Mars, then declines are: 1) much more likely and 2) more likely to be large.   But it is important to note that Mercury retrograde stations are a two-way street.   If they occur while Mercury forms a close aspect with a benefic planet like Venus or Jupiter, then stocks are likely to rally higher.

We can see how the Shanghai Stock Exchange chart got hit hard by this square of Mars (6 Libra) and Mercury (6 Capricorn) as it activated the North Lunar Node, Rahu (4 Capricorn) quite closely.  Mars also cast a very close and malefic 8th house quincunx aspect (210 degrees) to the natal Mars (5 Taurus) within one degree.  Mars-Mars aspects are also usually high probability bearish indicators.  By themselves, these factors would likely coincide with a significant down day of perhaps 2-3%.  However, there is bigger affliction here that likely explained why China's stocks fell limit down 7%.  Transiting Rahu (0 Virgo) is exactly aspecting natal Saturn (0 Capricorn) by its 120 degree aspect.  Rahu-Saturn aspects are usually bad news for stocks just as Mars-Mercury aspects are.  But since both Rahu and Saturn are slower moving planets, they are more likely to represent deeper declines as well as down trends that last for several days, if not weeks. 

While the steep decline on first trading day of 2016 seems to be a bad omen for the year, there are other ways of assessing the probable direction of stocks for the year to come.  In my New Year's Day chart analysis, I suggested that this same planetary alignment at midnight on New Year's Day could be a negative influence for the year.  This was due to the slow-moving Mars-Mercury aspect which was still very close to exact on January 1st. 

The New Year's Day horoscope arguably has a greater symbolic importance for annual collective sentiment than the outcome of the first day of trading.  In that sense, this very bearish Mars-Mercury aspect has now taken on a greater significance for the year as a whole.  This is another reason to expect a more difficult year in the stock market in 2016, particularly in US and Europe which were only down slightly in 2015.  Emerging markets like India are unlikely to escape this negative influence, although the percentage declines may be somewhat less since they already suffered greater losses in 2015.   You can find a more detailed forecast for the weeks and months ahead in my weekly subscriber newsletter.

We could see more downside tomorrow and even into Wednesday as the Mars aspect to Mercury is still within range.  However, we could see some changes in the second half of the week.  By Wednesday, Mars will be separating from Mercury and the Sun will align with Pluto and Uranus.  This offers more positive outcomes although even here the Pluto influence is a big question mark.  Thursday and Friday's Venus-Saturn conjunction looks bad for assets like gold but could be better for stocks.  I would not rule out any particular outcome this week given the high density of close multi-planet aspects in play here.  It should be a fascinating and volatile week.