Despite Ben Bernanke's best efforts to talk up the market by keeping the door open for a possible QE3, markets drifted lower this past week as the world seems increasingly mired in debt quicksand. The more it struggles to escape through bailouts and austerity programs, the deeper it sinks. In New York, the Dow tumbled lost about 2% closing at 12,479 while the S&P500 finished at 1316. It was much the same story in Mumbai as the BSE-Sensex fell back below technical support levels closing at 18,561 with the Nifty finishing at 5581. Amidst all this uncertainty, gold reached a new all-time high closing at $1590.
This bearish result was in keeping with expectations given the influence of aspects involving malefics Mars and Saturn. Monday's decline fit nicely with the Mercury-Mars aspect while Tuesday's loss reflected the Venus-Saturn aspect with a good dose of Moon-Mars that bumped up the arrival time by a day. The midweek rally attempt on the Moon-Venus aspect fell short, however, and weakness returned in time for Friday.
All the talk this week was about debt and how to avoid its worst consequences. The news out of Europe suggested that current debt levels in Ireland and Italy were unsustainable as bond yields shot up to reflect the increased risk of default in these over-leveraged economies. The bond vigilantes are back in force and they smell blood. In the US, the debate over the debt ceiling reached a new level of urgency as there appears to be no deal on the horizon yet with the August 2 deadline fast approaching. Both parties agree on the need for some austerity measures and significant government spending cuts, but Obama and the Democrats want to raise taxes also and thereby bridge the budget gap from both sides. A major agreement to cut spending in the long term looks more unlikely now, as both parties may have to content themselves with a short term fix. Whether financial markets will be satisfied with such a band-aid solution remains to be seen, although the Moody's downgrade threat of US credit rating from AAA would suggest there could be some negative fallout. A minor deal would likely send bond yields higher as it would increase the risk of default as well as increase future supply. Of course, failure to make any kind of deal would trigger a US default and generate even nastier consequences in the bond market. This would likely increase volatility in the stock market with potential short term gains, closely followed by declines as investors would realize that the whole financial house of cards would be one step closer to collapse.
In astrological terms, all this talk about debt and austerity is very Saturnian. After two years of Jupiter's faith in a Keynesian future of borrowing and spending, the return of Saturn's "less is more" approach has marked a discernible shift in tone. There is a growing realization that Jupiter-driven stimulus measures cannot solve our current economic problems alone. Saturn reminds us that sometimes the best solutions are ones where we pare back to essentials and discard what is no longer needed. Saturn's solutions tend to be harsh, not unlike purging the system of toxins. Although they can be unpleasant, they can be effective in the long run. However, Saturn is not fully in command of the sky at the moment as Jupiter still exerts some influence. This suggests that bailouts and the Keynesian spending approach will likely retain some appeal for governments such as the EU alongside the demand for greater responsibility and austerity.
The more immediate concern for the US government, however, is whether they can get a deal before the deadline. While the planets look somewhat cooperative over the next week or two, I do note that the August 2 deadline corresponds with the beginning of the Mercury retrograde cycle. This is not a indication of a successful action that relieves anxiety and resolves a problem. It reminds me of the situation on November 7, 2000 when Mercury turned retrograde right on election night in the US. That produced the famous hanging chad recount between Bush and Gore that went all the way to the Supreme Court. The election was ultimately decided more than a month later. What's worse is that Mercury will be opposite Neptune at the time it turns retrograde. Mercury-Neptune combinations speak to confusion and deception and lead to eventual disappointment. Perhaps there will be a deal but we could see some buyer's regret once the deadline passes, as one side recognizes they've been had. It seems a little implausible to expect there to be no deal at all, although the difficult planets at this time do increase the odds of this scenario as well. It seems more likely that the market will be disappointed with whatever transpires up to and including August 2.
This week is more of a mixed bag. The early week Mercury-Rahu aspect could go either way, although it's always hard to put much trust in Rahu. Mercury enters Leo on Wednesday so that may suggest some upside is more likely. The Sun's entry into sidereal Cancer this week could signal a change in direction, especially for the gold market. A reversal lower in gold would therefore be somewhat more likely. I will be paying close attention to the late week period as Mars approaches its conjunction with Ketu (south lunar node). This is a potentially explosive pairing that could spark some hard selling, although the exact conjunction will only occur after the close on Friday in New York. This may mute its effects.
