Draghi talk boosts stocks but will Saturn have the last word?

US markets moved higher last week as ECB President Mario Draghi reiterated his unwavering support for the Euro.  Investors took this as a sign that more stimulus would be forthcoming from the European Central Bank and pushed stocks higher as the Dow rose 2% closing above 13,000 for the first time since May.  The Dow closed at 13,075 while the S&P 500 finished the week at 1385.  It was a somewhat different story on Indian markets as a weaker than normal monsoon fueled inflation worries and made a rate cut more unlikely.  The Sensex lost 2% closing at 16,839 while the Nifty ended the week at 5099.   The late week gains arrived later than expected as I thought the midweek Mercury-Jupiter aspect would act as a magnet for optimism.  As it turned out, however, the aspect marked a shift away from the early week pessimism.  Stocks rose sharply after Dragi's remarks on Thursday.

While markets may have felt the warm embrace from Draghi's reassuring words, there is still a big difference between words and action.  Stocks may rally for a couple of days from such central banker jawboning, but any kind of sustainable push higher will likely require new policy initiatives.  The ECB is scheduled to meet on Thursday this week so it is possible that some new plans will be announced.  Actually, this week will have central bankers firmly in the spotlight as the US Federal Reserve will release its latest policy statement on Wednesday while the Reserve Bank of India is slated to do the same on Tuesday. 

It is quite appropriate then that we should see Saturn front and center this week as it changes signs and enters sidereal Libra on Thursday.  While Saturn is said to be exalted in Libra, I think our more pressing concern lies with the ingress itself.  All other things being equal, Saturn sign ingresses tend to be bearish for the markets since they represent a surplus of its caution and pessimism.  Just how this Saturn energy is likely to manifest this week is not completely clear, however.  On the face of it, a strong Saturn would tend to suggest that more stimulus is unlikely.  This may mean that the Fed and the RBI do not announce any new rate cuts or easing measures.  The ECB is in a somewhat different situation.  While it could announce easing, it may also have some new policies it could enact to mitigate the current banking and debt crisis.  It is conceivable that these needn't be directly tied to easing and money printing.  Nonetheless, the prominence of Saturn this week does suggest an increase in caution and that is probably incompatible with a major new stimulus measure. 

Jupiter is better seen as the planet of easing and stimulus.  It was prominent in most if not all of the major stimulus announcements in 2009, 2010 and 2011.  Currently, it is moving away from its aspects to Uranus and Pluto.  These aspects have helped to boost most global markets in the month of July but now it seems their effect may be diminishing as the aspects separate. 

What is particularly intriguing this week is that we have a replay of mid-May when both Venus and Saturn changed signs within a couple of days of each other.  While stocks moved higher for a day or two around this rare simultaneous double ingress on 14-15 May, stocks generally declined both before and after.  This time around Venus will enter Gemini on Tuesday two days before Saturn enters Libra.  Unlike the situation in May, Venus will not be stationing here so that may weaken its effects somewhat.  Venus sign changes are generally a more positive phenomena, so it is not unreasonable to expect some gains in the early week period.   As Venus moves deeper into Gemini, optimism is more likely to fade as Saturn assumes are greater role in the proceedings.

China avoids hard landing; Saturn to enter Libra

China came to the rescue of most global markets last week after Friday's GDP data came in near expectations at 7.6% suggesting only a mild slowdown.  Some investors had feared a more disruptive hard landing scenario in which a steeper decline in economic activity would have negatively affected the global economy.  Markets had been trending lower ahead of the release of the data.  In New York, the Dow closed largely unchanged at 12,777 while the S&P 500 finished at 1356.  Indian markets fared worse, however, as new IIP data came in stronger than expected and dampened rate cut hopes.  The Sensex lost almost 2% closing at 17,213 while the Nifty ended the week at 5227.

This mixed result was not unexpected as I had been fairly neutral about last week.  The nasty Mars-Ketu aspect in the early week did produce some significant downside, especially on US and European markets.  I thought we would see some kind of recovery starting midweek around the Mercury-Venus aspect.  As it happened, this finally arrived on Friday but made up for the preceding days' losses.

While China avoided the worst case scenario, Friday's rally assumed that the weakening growth data would nonetheless still require more stimulus from the Chinese government.  In that sense, the stock market is still as addicted to central bank interventions as ever.  A recent study has suggested that without the Fed's quantitative easing measures over the past three years, the market would be 50% lower (i.e. Dow at 6500) .  The problem for stimulus-addicted investors in this US election year is that the Federal Reserve cannot be seen to be partisan.  A new round of QE would likely boost the stock market and this could therefore improve Obama's re-election chances.  Republicans have increased their criticism of the Fed and Ben Bernanke in recent months for debasing the dollar and creating inflation.  If Romney happens to win the election, there will be many in the Republican party who will call for Bernanke's removal as Fed Chair.  Bernanke's ouster would be all but certain if he decided to launch QE3 in the next month or two before the election and then Romney won anyway.  Therefore, Bernanke therefore needs to tread very carefully this summer and avoid sparking more opposition. 

The astrological case for QE3 is far from clear. A significant round of stimulus would tend to require many Jupiter aspects as that planet rules expansion. The printing of money in order to stimulate the economy is very much a Jupiter-type of activity. We had major Jupiter aspects from 2009 to 2011 when Jupiter formed prolonged angles with Neptune, Uranus and Chiron for months on end on several different occasions.  This is not the case now.  This would tend to argue against another major round of QE, although it may not preclude smaller, less intrusive measures.   The next major Jupiter aspect is not due to occur until early 2013 when Jupiter forms a close aspect with Uranus.  That may be a better bet for the next major easing from the Fed, or from other central banks. It is possible that China's central bank could act before then, but it may not be large enough to spark a major rally.  Jupiter is in aspect with Uranus and Pluto this week, so that might suggest a somewhat greater likelihood of some kind of expansionary activity taking place.

This week looks like it could bring some interesting developments.  There is powerful alignment of planets through much of the week that could move markets significantly.  The ongoing Uranus-Pluto square aspect is joined by both Mars and Jupiter this week.  The last time the Uranus-Pluto aspect was activated by a third planet was after the EU summit on June 29 when the market rallied strongly.  This occurred as the Sun lined up in a t-square with those two distant planets.  This time around Mars will assume the role of the Sun, and form another t-square.  Mars is more of a negative influence than the Sun, however,  so there is less reason to expect gains, at least in the early going.  Of course, Mars has the capacity to take the markets lower so that is definitely a possibility at some point.  However, the presence of Jupiter in the mix would seem to be more positive.  It forms a close aspect with Uranus later in the week which tends to correspond with gains. 

But even if we do happen to see some upside here, the clock would appear to be ticking on the market as Saturn approaches its entry into sidereal Libra on August 1.  This is usually a bearish influence.  Previous Saturn sign changes have corresponded closely with declines.  Saturn first went into Libra last November when the market dropped more than 10%.  As it moved backward through its retrograde cycle, it then entered Virgo in May and the market declined again.  Saturn's re-entry into Libra here is definitely not something to be taken lightly.

Bad US jobs report links Obama to "zombie economy"

No matter how skilled a politician he may be, this week's poor jobs report has forced President Obama back on his heels.  Friday's weak US employment report showed only 80,000 new jobs were created in June, far below the +200K from earlier in the year.  The unemployment rate remained unchanged at a stubbornly high 8.2%.   The disappointing performance gave more ammunition to Republican Mitt Romney as a sign that Obama's interventionist Keynesian-style policies aren't working.  Things are getting so bad that some US media outlets are now started to refer to the "zombie economy" which is effectively dead.  If that term gains traction, it would be very difficult for Obama to overcome the label and win in November.  While I am fairly pessimistic about the prospects for the economy, I do think Obama will prevail in the election.  That suggests there may be other factors involved in his victory over Romney.

There was more bad economic news as we had no less than three different attempts to stimulate the flagging global economy as central banks in China and Europe both cut their interest rates, while the Bank of England undertook a new round of quantitative easing.  Markets were less than enthused by these developments as the Dow fell almost 1% on the week closing at 12,772 while the S&P 500 finished at 1354.  Indian stocks fared better as investors anticipated an RBI rate cut later in the month.  The Sensex enjoyed modest gains closing at 17,521 while the Nifty ended the week at 5316.  While the week may have ended badly, stocks did make new highs along the way.  This positive result was in keeping with expectations as I thought that the midweek Venus and Mercury aspects would produce gains.






Clearly, the global economy remains as fragile as ever.  The sense of relief from the recent European bank bailout is fading fast as Spanish bond yields have crept back up to that critical 7% level.  The Euro is hitting new lows as it is trading below 1.23 against the US Dollar. China's rate cut was the second in less than a month and signals a growing risk of recession.  All of this uncertainty does seem like an appropriate reflection of the dominant planetary aspects that are active at this time.  The Jupiter aspect to the Uranus-Pluto square offers some prospects for gains in the short term but this will be a fairly quick alignment which may not correspond with a major move higher in the stock market. At the same time, Saturn is soon to re-enter the sign of sidereal Libra.  These Saturn ingresses are usually bearish and this could easily offset whatever positive energy may result from Jupiter's aspect.  As I see it, the more powerful Uranus-Pluto aspect undermines the possibility for any significant economic recovery any time soon.  This aspect just had its first exact aspect in June and will likely haunt the economy for the next two or three years.  We could see some solutions offered, but they are likely to be temporary.  Perhaps the US will follow in the footsteps of Japan and its "lost decades".  Like Japan after its stock market crash in 1990, the US is attempting to stimulate the economy through additional government spending.  While this will likely prevent a worst case depression scenario, growth may remain low for many years to come. 

This week looks like we could see more treading of water.  First off, there is a fairly nasty looking Mars aspect with Ketu, the south lunar node. This could manifest at any time in the first half of the week, although there is an argument to be made for Monday given the Moon's opposition to Mars at that time.  However, Mercury will be in aspect with Venus in midweek and after so that seems likely to correspond with some upside.  Jupiter also moves one step closer to its aspect with Pluto and Uranus so that adds to the bullish side somewhat.  Friday's session is more of a question mark since the Sun approaches its square aspect with bearish Saturn.  The aspect won't be exact but it may still disrupt the mood.  Gold may also suffer at week's end as a result of this Saturn influence on the Sun.