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.

2012 starts positively; Venus vs. Saturn this week

2012 started off on a positive note as stock markets climbed on more signs of global growth in China and the US. Friday's US jobs report showed gains of 200,000, although there were a number of caveats attached to this larger than expected number. In New York, stocks posted a 2% gain as the Dow closed at 12,359 while the S&P 500 finished at 1277. Indian stocks similarly put in a winning week with the closing almost 2% higher at 15,867 and the Nifty at 4754. While I thought we would see some early week upside on Mercury's entry into Sagittarius, the extent of the rise was somewhat surprising. As expected, the late week period was less positive as the Sun-Rahu aspect put a damper on enthusiasm.

The reaction to Friday's jobs number underlined the caution approach of financial markets these days. While the number was larger than expected, the US market actually declined modestly. Part of the reason for this was that the job growth was a little deceptive owing to a high number of temporary seasonal jobs. 200K is good, but it seems less likely to be duplicated when January's report comes out. The gains for the week also came despite more worrying signs coming out of Europe. With unemployment rising sharply (e.g. it is now 22% in Spain), it is unclear how the economy will begin to grow again. While stock traders appeared to have a fresh supply of rose-coloured glasses at the ready for 2012, the bond market was taking a less sanguine view of things as EU bond yields continued to inch higher. Higher yields means higher borrowing costs which will ultimately force more austerity and slower growth. Definitely not a recipe for recovery. Private European banks have become so fearful of lending to each other that they are choosing to forgo the higher interest rate and park their money at the ECB instead.

Perhaps its only fitting that such a mixed and convoluted financial situation would occur at a time when the planets are offering signs of both hope and fear. Bearish Saturn is still very much front and center as it opposes Jupiter. Its role in the larger alignment with Jupiter and Uranus over the past several weeks is one important reason that stocks have been limping along. While some markets have melted higher, volume has been low and conviction has been lacking. At the same time, bullish Jupiter is in a very close and powerful aspect with speculative Uranus. This has been a crucial reservoir of hope in the economy and one reason why some stock market investors have not hit the panic button. Although not yet robust, the signs of economic growth are there. And even if growth underwhelms, there is still the Fed which can be relied upon to inject another dose of its magical quantitative easing to goose the market higher. Neptune has now moved into this alignment but will be closer to Saturn over the next month or so. This could easily tilt the whole equation more clearly towards the negative. To make things even more ripe, Mars is due to turn retrograde on January 23.

This week is particularly interesting because of the high number of close aspects in play. Usually this suggests larger than normal gains or losses. Cautious Saturn is well represented as it makes its closest aspect with Jupiter. At the same time, it forms a 45 degree aspect with nefarious Rahu. These are both important sources of pessimism that should not be taken lightly. On the other hand, Jupiter is still just a few arc minutes away from its bullish aspect with Uranus so that might produce some significant upward movement along the way. The short term influences are no less potent. On Monday, bullish Venus enters sidereal Aquarius. Whenever Venus changes signs it often correlates with higher prices. The midweek has perhaps fewer distinguishing aspects so those medium term (negative) Saturn influences may have more opportunity to express themselves. The late week period is the real puzzle, however. Thursday and Friday sees a remarkable Venus-Neptune-Saturn alignment, a Mercury-Pluto conjunction and a Sun-Mars aspect. The concentration of these aspects suggests a larger than normal move is more likely here. But which direction? Mercury's affliction by Pluto looks negative as does the Sun-Mars aspect, but the Venus alignment has the potential to flip things into the plus column.

2011 ends on down note; Saturn-Rahu could dampen start of 2012

2011 ended on a quietly somber note as global markets factored in lower growth expectations from the ongoing Eurozone problems and rising Italian bond yields. In New York, the Dow slipped less than 1% on reduced volume closing at 12,217 while the S&P 500 finished at 1257. As has often been the case this year, Mumbai suffered a larger loss as the Sensex declined 2% closing at 15,454 with the Nifty ending the year at 4624. This bearish outcome was largely in keeping with expectations as the Mercury-Rahu conjunctions on Tuesday/Wednesday and the Sun-Pluto conjunction on Thursday weighed down sentiment. As expected, we did see a brief rise on Monday in India right on the same day that Jupiter became stationary. This was a fairly clear bullish indication. Friday's Moon-Mars aspect also corresponded with declines on the final trading day of the year.

On the whole, 2011 was a negative year for the economy and most global markets as runaway inflation and diminishing growth prospects weighed heavily. US markets were mostly flat on the year, while European and Asian markets suffered heavier losses. India declined 25%. Given the rash of Saturn aspects through 2011, this negative performance certainly did not come as a surprise. I thought we might have seen more downside in US market than we did, but generally the market appeared to reflect my understanding of the various planetary energies at work. As ever, Saturn revealed itself again as the killjoy of the solar system as its aspects approximated times of particular pessimism in the markets while Jupiter's aspects tended to correlate with periods of expansion and optimism. There is still so much we (meaning I, of course) don't know about how planetary positions may correlate with financial sentiment. The margin of error in financial astrology is depressingly huge. And yet it is somewhat reassuring when such basic first principles such as Saturn = bad and Jupiter = good are broadly reaffirmed by a fresh batch of data points. This suggests to me that astrology has more in common with science than intuitive art and should be amenable to scientific investigation -- with apologies to Galileo. Financial markets provide an excellent source of data on which some of these seemingly implausible assertions about the significance of the position of the planets can be tested.

The first week of 2012 seems like a good candidate for more declines. The medium term influences are apparently negative: Saturn is almost at its closest aspect with Jupiter, while Rahu is also moving into position for its aspect with Saturn. Saturn-Rahu aspects are notoriously bearish, although it is conceivable that it could manifest next week rather than this week. Mercury's entry into sidereal Sagittarius on Tuesday and Wednesday could correspond with some optimism but it does not look particularly robust. At the same time, the Sun will be forming an aspect with Rahu which may further undermine sentiment. All in all, the cards seemed stacked against the market here, perhaps in a big way. And yet there is an absence of any clear short term triggering aspects that makes me wonder if some larger moves could be postponed for a while.

Overall, 2012 looks like another difficult year for the markets. The current configuration of Jupiter-Saturn alongside Neptune and Uranus may well exercise a negative pull on markets into February. Jupiter will take over for a while after that and could bring a good relief rally into March. But the problem is that Jupiter will weaken after March while Saturn remains quite strong through much of the spring. This greatly increases the likelihood for more troubles in the financial world during Q2. To make matters worse, we will have an exact square aspect between Uranus and Pluto in June. These two distant planets only form aspects quite rarely so this aspect is definitely one to watch. Generally it is considered bearish and disruptive to the status quo. Since markets don't like uncertainty, we can expect to see some fallout from this aspect near the middle part of the year. This aspect will last through much of 2012 and will tend to create more upheavals and uncertainty. If anything, 2012 looks like it may be worse than 2011 in terms of global market performance.

Santa arrives bearing ECB gifts; Jupiter stations on Monday

Stocks rallied last week as Santa Claus arrived carrying a sack full of ECB liquidity. In the latest attempt to solve the European debt crisis, the ECB announced plans to buy bank $600 Billion in bonds as a way of supporting the broken sovereign debt market. After some early week jitters, the Dow rose more than 3% closing at 12,294 while the S&P 500 finished at 1265. Indian stocks also participated in the rally as the Sensex climbed more than 1% closing at 15,738 while the Nifty ended the week at 4714. This bullish result was in keeping with our expectations as the Sun and Venus aspects to Jupiter laid the cosmic groundwork for higher stock prices. I was also correct in my forecast for some early week declines as Monday's Sun-Saturn aspect corresponded with significant down move. Once Venus moved into alignment with Jupiter on Tuesday/Wednesday, buyers moved in.

Central bankers continue to prop up markets as best they can as the European banking crisis threatens to engulf the global financial system. With so many European banks over-leveraged, they remain dangerously exposed in the event of any national default. This makes it more important that bond yields be kept as low as possible lest borrowing costs spiral out of control. With so few buyers left in the bond market, the ECB stepped in where others were afraid to tread and provided a floor. Last week's Jupiterian intervention did calm markets although it is unclear for how long. Several hundred billion euros worth of debt is scheduled to come due in the next couple of months. Will the ECB simply go more deeply into debt in order to buy these up and keep rates low? It is possible, but Germany may grow increasingly uncomfortable with the ECB's increasingly burdened balance sheet as Merkel faces political opposition at home.

The planets suggest that the usual solution of throwing money at the problem may run into some problems in the near term. To be sure, Jupiter is quite strong at the moment as it prepares to station on Monday December 26. Stationing planets are very powerful so we cannot rule out the possibility of more bank intervention to keep all the plates spinning in the air. Jupiter equates to optimism in a general sense and to economic solutions that are often rooted in borrowing and greater levels of debt. Debt is, after all, a statement of confidence and optimism of a brighter future where projected revenues can cover all interest payments. But the close opposition aspect between Saturn and Jupiter suggests that the tried and true solutions may not gain traction in the short term. Saturn's presence in the current mix indicates a possible obstacle or disappointment which could affect the economic bottom line and sidetrack the markets. Saturn is the cosmic pessimist (or is that realist?) and takes a dim view of excessive borrowing. If the glass is half-empty, then how will all this borrowed money ever be paid back? That may become more of a worry over the next few weeks.

This week looks more troublesome. Jupiter does station on Monday (when most markets are closed, however) so it is possible that we could see some very early gains, especially in Asian markets. But the conjunction of Mercury and Rahu (North Lunar Node) on Tuesday and Wednesday could be more of a problem. Rahu creates distortions and uncertainty so there is a bigger opportunity for declines. As an added source of potential trouble, the Sun conjoins Pluto on Thursday. This is less clearly bearish but it is less likely to boost the prospects for any follow through for the Santa Claus rally. Friday's Moon-Mars opposition will also be another burden for investors to negotiate, especially in Asia.

Markets have second thoughts on EU fiscal pact

After reading the fine print on the EU's new fiscal pact, investors had a change of heart last week as stocks and commodities tumbled across the board. Confidence in the proposed fiscal union quickly unraveled as the market realized that economic growth may be more difficult under stricter austerity measures. US Stocks fell 3% as the Dow finished at 11,866 and the S&P 500 ended the week at 1219. Indian stocks were even weaker as the Sensex lost 4% closing at 15,491 with the Nifty coming in at 4651. Gold plunged 7% and broke below $1600 for the first time since July. This bearish outcome was pretty much in line with expectations as the Mars-Rahu aspect depressed sentiment. I thought this would likely make the first half of the week more vulnerable to declines and this was the case in the US and in commodity markets such as gold and oil. The late week brought the anticipated rebound as the dual ingresses of the Sun and Venus injected a measure of relief. Mumbai extended its slump into the late week, however, as worries over the falling rupee and the RBI update undermined the otherwise improving mood.

The problem is that the European Central Bank is unwilling to give the markets what they want. The bond market is signaling that debt levels are unsustainable and must be brought down. This is what the latest EU agreement addressed by imposing strict limits on the size of future government deficits in the Eurozone. But that means that governments will have to cut spending and raise taxes -- two things that reduce economic activity. A slowing economy means lower corporate profits, and this creates a drag on stocks as investors rethink the risk-reward of owning stocks. Theoretically, the ECB could undertake a Fed-style quantitative easing program and buy large amounts of sovereign debt from teetering economies like Italy and Spain, but its mandate does not permit it to do so. In addition, there is a political unwillingness to undertake such an inflationary policy, probably because Germany is the puppet master here and it does not want to fuel inflation and thereby lower its standard of living.

The stock market was looking for more stimulus and liquidity from the EU and the ECB but it was disappointed when all it got were more promises to cut spending. As I have been saying for a while now, the growing strength of Saturn here tends to reduce the possibility of a stimulus QE-style program. Saturn's opposition with Jupiter limits the range of policy action as collective psychology may be more geared towards accountability and responsibility. "Getting one's house in order" and "doing the right thing" are very typical catch phrases of this conservative Saturn-Jupiter ethos. Parenthetically, I should say that I don't actually believe that the planets somehow 'cause' these mental states or events. It may only be that there is a correlation between planetary positions and the ebb and flow of these collective phenomena. A giant cosmic clock, so to speak, where the planets are the hands of the clock and they tell us what 'time' it is, i.e. what mood should prevail. Metaphysics aside, the current Saturn-Jupiter aspect would tend reduce the probability of an announcement of any major central bank liquidity "bazooka" in the near term. The aspect is due to make its closest angle in early January and will still be quite close until Saturn's retrograde station on February 9.

The planets this week seem more positive than last week as Jupiter is seemingly highlighted more than Saturn. That said, the early week period does look more vulnerable to declines as Monday's Sun-Saturn aspect could see distress involving governments (more EU downgrades?). This could easily correlate with a decline in stocks and especially gold which is usually more sensitive to afflictions to the Sun. Tuesday's Moon-Saturn conjunction is another potentially problematic aspects, although it may be offset somewhat by Venus-Jupiter. A rebound seems set to begin on Tuesday or Wednesday as Venus moves into aspect with Jupiter and Uranus. The Sun follows suit by Thursday so that should serve to lift the mood of the markets. Friday's Moon-Rahu conjunction is more suspect, however, so weakness may be more likely at that time.

EU summit agrees on fiscal union; Saturn guides Merkel to austerity

If at first you don't succeed, try, try, try again. European leaders came together last week and forged yet another agreement to solve the continent's ongoing debt crisis. Rather than raising bailout money for insolvent countries as they did in October, this time the emphasis was on fiscal responsibility. The new fiscal pact will therefore regulate government spending levels by member states in an effort to reduce debt levels and thereby reduce borrowing costs. The German-led plan will attempt to improve the balance sheet through collective austerity at the expense of national sovereignty. The UK was the only EU country that did not sign on to the fiscal union, much to the ire of its European partners.

Germany's focus on austerity and fiscal responsibility carried the day and suggests that there will be not be a quick fix for the Eurozone. Interestingly, on the previous day the European Central Bank (ECB) had ruled out any inflationary QE-style bond buy back program. Both of these developments seem to be an appropriate reflection of growing strength of Saturn. As the planetary symbol of restraint and responsibility, Saturn will tend to emphasize caution and reduce the appeal of free spending (liquidity) and excessive borrowing in order to solve economic difficulties. True, we have seen some modest attempts to inject money into the system recently as the ECB reduced its overnight rates to 1% shortly after the Fed opened up its wallet to European banks earlier in the month. As we know, planets are constantly in motion and their influences are subject to ebb and flow. Expansive Jupiter and risk-taking Uranus have recently come into close aspect and this is one reason why we have seen some efforts to keep the financial system afloat through inflationary means. But these efforts will probably be fairly limited given Saturn's proximity for the next two months.

World markets reacted favourably to the latest EU plan as the Dow rose 1% closing at 12,184 while the S&P 500 finished at 1255. Indian stocks were more negative in part due to political opposition to a proposal to allow FDI in the retail sector. The BSE lost almost 4% closing at 16,213 while the Nifty ended the week at 4866.

The global financial situation continues to be quite shaky at the moment as opposing economic philosophies do battle. Keynesian-inspired inflationistas seek to borrow more money to revive confidence and stimulate spending and thereby boost government revenues. Most market participants seem to favour this approach since the increased liquidity (free money from the Fed, ECB, RBI ,etc) means greater economic activity and the reduction of risk. We can see how dependent the stock market has become on this approach from Thursday's sharp decline. Stocks sold off after the new ECB Chair Mario Draghi announced there would be no Eurobonds and no QE-style buy back program. In others, we was not going to follow in the footsteps of Ben Bernanke. If the stock market tends to prefer the free spending largesse of most central bankers, the bond market tends to gravitate towards the stricter accounting procedures of the free market school of Austrian economics. If a country spends and borrows beyond its means, buyers of its debt demand a higher yield on their bonds since the risk of default is greater. This is where Europe is now and one of the main reasons why it has chosen to focus on reducing debt.

At this point, it is unknown if the financial markets will accept the current focus on austerity and debt reduction. Austerity will tend to lower bond yields which is very important to recovery, but austerity usually also entails a painful period of economic slowdown that the stock market does not like. This is the main reason why stocks will tend to decline during times of debt reduction. The astrological dimension here suggests that Saturn's preference for austerity, caution and accountability is more likely to be the driver's seat (alongside Angela Merkel) for several more weeks at least. While Jupiter-Uranus may generate some stimulative proposals, they are unlikely to be significant as the market will tend to focus on the pitfalls of spending (excessive debt) rather than its upside of more economic activity.

This week will feature a potentially nasty Mars-Rahu aspect in the first half of the week that suggests more downside. Saturday's lunar eclipse may serve to amplify the proceedings so there is a wild card element at work here. At the same time, Jupiter and Uranus will form their exact 30 degree aspect this week, so that may provide some support for buyers along the way. It may also serve as an accelerator of events and consciousness in a more generic way. The sidereal sign ingress of both Venus and the Sun in the late week period also would seem to boost the possibility for gains then.

Stocks rally on cheap Fed loans to Europe; EU summit due Friday one day before eclipse

How do you solve a debt crisis? With more debt, of course! Europe's financial endgame was put on hold last week as a coordinated central bank intervention flooded its crippled banking sector with cheap US dollars. The Fed's injection of fresh liquidity was widely applauded as global stocks markets soared and bond yields fell back to earth. In New York, the Dow zoomed higher by 7% closing at 12,019 while the S&P 500 finished at 1244. While the size of the rally was unexpected, I did suggest that the first half of the week was somewhat harder to call and that upside surprises were more likely to occur then. Such sudden developments are not uncommon during eclipse periods such as we are in now. As expected, the late week was weaker on the Mars influence, although its negative effects were quite muted. Indian markets also moved sharply higher throughout the week as the Sensex rose 7% closing at 16,846 while the Nifty ended the week at 5050.

Now we are one step closer to some kind of resolution -- for good or ill -- to the European debt crisis. An EU summit is scheduled for this Friday where the latest bailout package will be unveiled for all to see. What will the markets think? In previous posts, I have noted the approach of the Jupiter-Saturn opposition aspect in December and January and how this is likely to create a mood of caution and skepticism towards any new Eurozone bailout plans. Last week's free spending intervention was suggested that we might have to wait a little longer for the the true spirit of Saturn to settle in. The complicating factor in the upcoming Jupiter-Saturn aspect is that these two planets will have company. As I have discussed in more detail in my newsletter, Uranus and Neptune will also figure prominently in a much larger four-planet alignment that will be in its tightest configuration in January. At the moment, risk-taking Uranus (6 Pisces) may well be resonating more closely with expansionary Jupiter (6 Aries). This is usually a bullish pairing that often coincides with rallies. Their unusually long conjunction in 2009 and 2010 was a key factor in a huge QE1 and QE2 recovery rally after the meltdown. So this latest example of inflationary Fed largesse is more likely the result of this Jupiter-Uranus aspect. It is worth noting that both planets are moving very slowly this month since Uranus stations this Saturday and Jupiter is due to station in late December. Slow planets are more powerful, and powerful bullish planets can translate into optimism and significantly higher prices for assets.

But Saturn is gradually edging its way into this equation as it moves closer. Just when we might see more fear and caution enter the markets is harder to say. It could be next week, or it could be next month. But what we can say is that the presence of Saturn in this larger alignment undermines the likelihood of a quick resolution to the Eurozone crisis. If Jupiter and Uranus like to solve debt problems through by issuing more debt and stoking inflation, Saturn prefers the tougher road of austerity and constraint. Germany's PM Angela Merkel appears to be holding fast onto this more Saturnian approach to the crisis as she has categorically refused the possibility of issuing Eurobonds which would weaken Germany's credit rating and fan the flames of inflation. As Saturn is likely to strengthen over the coming weeks, there is little reason to expect Merkel's view will change. The markets may want a full-blown money printing QE-type solution, but they are unlikely to get what they want with Saturn sitting on the doorstep. It will be recalled that the first brush with Greece's insolvency appeared in mid-2010. Markets fell sharply in May (the flash crash) as the vulnerability of the Eurozone became apparent. It was no coincidence that Saturn played a key role in that event as it formed a close alignment with Jupiter, Uranus and Neptune from May to August 2010. The same planets are involved this time around, although the angular arrangement is different. History may not exactly repeat itself, but it may well rhyme.

This week could see some weakness in the early going due to the Sun-Rahu conjunction on Tuesday and the approach of the Mars-Rahu aspect. Both of these are short term influences however, so it is unclear if they will be enough to crowd out the otherwise bullish influence of Jupiter and Uranus. Perhaps gains are more likely as we get closer to Friday. Uranus will be super strong on Saturday for its direct station as it concludes its four month retrograde cycle and returns to direct motion. Uranus stations can be turning points in the market that deserve close watching. What makes this particular station particularly interesting is that a lunar eclipse occurs on the same day. Since this will be just one day after the EU summit, there is a greater chance for major new developments. On paper, this eclipse + Uranus combination should not be positive for finding a durable solution for Europe. Eclipses are destabilizing influences which shake the status quo. More conservatively, it is possible this energy will simply reflect proposals for a new fiscal union in the Eurozone. This would chart a course that would fundamentally change the EU from a simple currency union between countries into something that resembles a "United States of Europe" that is more closely integrated. Whether or not it will be favourably received is harder to say. Saturn's fairly close proximity here makes me think the reaction won't be good, although it may not happen immediately.