US stocks resumed their ascent last week as worries over Egypt were pushed aside in favour of improved corporate earnings. The Dow gained more than 2% to close at 12,092 while the S&P500 finished at 1310. Indian stocks fared less well, however, as the selloff continued in earnest on growing fears that domestic inflation may be out of control and could require a series a punishing rate hikes. The Sensex declined 2% to close at 18,008 while the Nifty ended the week at 5395.
I had expected some probable upside on the early and midweek Mercury-Venus aspect and we did in fact see US and European equities chalk up impressive gains on Tuesday along with smaller gains on most other days. Indian markets have been severely lagging however and did not experience any lift until Wednesday and Thursday's positive sessions. Most commodities also saw rising prices on these bullish planetary patterns. I had also suspected some significant downside was possible near the Sun-Mars conjunction late in the week. While US stocks were temporarily immune to this bearish combination, Indian stocks were not as Mumbai declined more than 2% on Friday. Commodity markets such as oil and gold also followed this negative Sun-Mars cue and sold off on Friday.
Perhaps the real news last week was the rising yields in the bond market. Both 10-year and 30-year treasuries saw yields breakout above a technical resistance level as they appear to be heading substantially higher. What is strange is that Ben Bernanke's QE2 program was designed to lower bond yields in order to support the housing market recovery and keep mortgage rates down. Clearly that isn't happening as bond buyers are now demanding a higher premium as compensation for perceived inflation risk. So while the US stock market is not very worried about the long term implications of the Fed's unapologetic exercise in money printing, the bond market now is. If rates continue to rise, it will eventually put pressure on stocks as investors will choose to park their money in high-yielding treasuries. The QE2 inflationary bubble is already wreaking havoc in China and on the Shanghai Stock Exchange and now appears to be in the process of bursting in Mumbai. But the US may have to play catch up in that respect. Let's see if Ben Bernanke's BBQE2 chickens ever come home to roost.
This week will begin with a possible hangover from the Sun-Mars conjunction that was exact over the weekend. Its aspect with Saturn is still just one degree from exact on Monday so it is quite possible this could produce some skittishness, especially in New York. At the same time, a more optimistic Venus-Jupiter aspect could subsume some of the gloom. Venus will retain a starring role this week as it moves into conjunction with pecuniary Pluto by Wednesday. This ought to increase the appetite for buying and boost the appeal of many risk assets such as stocks and commodities like gold and oil. The late week period looks less positive, however, as there are no obvious sources of planetary strength.
