Happy New Year

Next post on Sunday January 3, 2010.

Gold tumbles further, stocks flat

Stocks were mostly flat last week as positive US retail data was offset by renewed worries over government debt levels in vulnerable jurisdictions like Dubai and Greece. Blue chips performed a little better than the broader market as the Dow closed at 10,471 while the S&P finished at 1106. It was much the same story in Mumbai where equities again failed to punch above resistance levels as the Sensex closed at 17,119 and the Nifty 5117. While the early week Mercury-Saturn-Pluto alignment was bearish as expected, the relative easy rebound later on the Sun-Mars aspect demonstrates how much positive planetary energy is still available. No doubt part of the story is the approach of the Jupiter-Neptune conjunction which comes exact December 21. These two planets have played a huge role in this rally that dates back to March. Jupiter symbolizes optimism and expansion and Neptune embodies notions of idealism and image. Together, they are a potent combination that says "hope" for the future. It's not a coincidence perhaps that the Copenhagen climate conference is meeting just a few days ahead of the exact conjunction of these idealistic and hopeful planets. President Obama will address the meeting on December 18 at a time when Jupiter and Neptune will be separated by less than half a degree -- sounds like it could be a hopefest -- albeit one motivated by quasi-apocalyptic concerns as Saturn squares Pluto (death and suffering) and Mars (conflict and violence) is almost stationary. In market terms, the presence of this underlying force of Jupiter-Neptune optimism has prevented the more negative aspects from taking the market significantly lower.

This week offers more positive short term aspects as the transiting Sun will form a complex alignment with Jupiter, Uranus and Neptune early in the week. This could well boost stock prices temporarily as well as give a lift to gold, which has been recently beaten down by the rising Dollar. On Wednesday, a New Moon occurs in the first degree of sidereal Sagittarius and is another possible "reset" button for the market. Given that the Sun will be separating from those outer planets, some declines are more likely as the week progresses. That said, Venus is close on the Sun's heels at the moment so by Friday it will be within just two degrees of its minor aspect with Jupiter. These are two bullish planets so it's not unreasonable to expect an up day towards the end of the week.

Besides the upcoming Jupiter-Neptune conjunction, Mars goes retrograde the previous day on Sunday, December 20. We are fast approaching the apex of these two important medium term influences. Financial markets may therefore undergo a substantial re-organization in the very near future. A similar re-ordering of the currency markets just occurred with the Uranus station on December 1 when the Dollar finally reversed its decline as Gold topped out above $1200. With the carry trade now in jeopardy, we could see other important ramifications from the appreciation of the US Dollar.

Dollar strength puts gold rally in jeopardy

The US Dollar showed signs of life late last week as a better than expected jobs report created increased the likelihood of higher interest rate hike. Stocks were generally higher with the Dow trading near 10,500 on several occasions before closing at 10,388 with the S&P at 1105. In Mumbai, positive growth numbers from September lifted shares almost 3% for the week with the Sensex finishing at 17,101 and the Nifty at 5108. While I had been more bearish, the market did generally follow expectations as most of the gains came early in the week on the Mercury aspects to Uranus and Neptune with declines occurring later as the harmonic aspect between Mars and Saturn tightened and Venus came under Saturn's sextile aspect. The most interesting day was Friday as the jobs report brightened the outlook for the Dollar. While stocks were up sharply at the open, profit taking took over and markets slumped after that. This was the first hint perhaps that more good economic news may longer be good for the markets since it risks ending Bernanke's low interest rate regime and the cheap dollar and the resulting carry trade that has fueled the bubble of 2009. After making a high of $1227 on Thursday, Gold plunged over 5% on the renewed enthusiasm for the Dollar.

This week looks more clearly negative, at least in terms of fast moving transits, as two transits will dominate the sky. First, Monday's Mercury-Pluto conjunction may trigger a lot of pessimism due to its 90 degree aspect with Saturn. It's possible that the bearishness may spill into Tuesday since Mercury will still be close enough. The Moon transits Leo early on the week and that may not help matters any since it will be hemmed in between malefics Mars and Saturn. Wednesday's Virgo Moon applies to Saturn is another source of worry since it will again release that problematic Saturn-Pluto energy. The second pattern of significance will be more prominent later in the week as the Sun will form an exact 120 degree aspect with Mars on Thursday. While both planets are natural malefics, it's not clear if this will generate negative market sentiment. It seems there will be enough malefic energy to generate one down day at the end of the week, but we should expect a bounce day here also.

As optimistic Jupiter slowly makes it way towards idealistic Neptune and their conjunction on December 21, it seems likely that we will see another manifestation of this hopeful planetary combination. Off the top, we can see that the Copenhagen climate conference from Dec 7-18 is an embodiment of this idealism and hopefulness as world leaders will once again come together with the best intentions and grapple with this seemingly intractable policy problem. It remains to be seen, however, if anything of substance can be achieved from this meeting. In market terms, the huge bubblicious rally that began back in March can be understood in terms of the initial conjunction between Jupiter and Neptune. Due to retrograde motion, these two planets have been in fairly close proximity with each other for the past eight months. Previously, this optimism manifested as hope for an economic recovery which, in turn, sparked a rally in stocks as investors looked forward to improved corporate earnings. While it is very possible that the December 21 conjunction could coincide with another move higher, there is another plausible interpretation. This time hope for economic recovery may only translate into a higher Dollar since continued good news will boost the greenback. This is exactly what happened on Friday as the Dollar soared against most other world currencies on good employment numbers which increased the likelihood for a rate hike sooner rather than later. But what's good for the Dollar may be bad for stocks because much of the recent rally is rooted in the dollar carry trade. If the dollar continues to appreciate on hopes for a recovery, the carry trade will unwind and this will generate a mass exit from equities. Needless to say, gold is also extremely vulnerable here as the Dollar gets its mojo back.