Week of June 29 – July 3 v. 2/26

After a fairly steep sell off earlier in the week, stocks recovered on Bernanke’s soothing comments to close slightly lower.  Although it traded just above the May lows around 890 early on, the S&P ended the week at 918 while the Dow closed at 8439.  This outcome was higher than forecast, mostly on the account of Thursday’s surprising rise.  Monday’s decline and Tuesday’s continued weakness came on the Venus-Mars-Saturn alignment and the Sun-Pluto opposition.  While I was tentative about the prospects for the pullback there, it was a clear possibility.  Thursday’s 2% rally occurred on the Mercury-Saturn aspect which I mistakenly pegged for a decline.  A clear aspect like that often shows a strong price move either way, but I underestimated the role of secondary factors in reversing the sentiment from that apparently difficult combination.   Aside from the interpretative error on my part, the return of the bulls later in the week revealed the latent strength in the market as stocks never got down as low as 8200/880.  This can be seen as a bullish development.   On the other hand, volume remained indifferent last week, with slight increases on down days, and the MACD stayed negative albeit with lessening bearishness.  The bullish golden cross of the 50 and 200 day moving averages occurred on the S&P last week but the Dow lagged behind, although it will likely follow suit next week.  Given the late week rebound, there is a good chance that we’ve put in some solid lows here after which the market can higher.

With the markets closed Friday in observance of the July 4th holiday, this week is a good candidate for gains as both benefics, Mercury and Venus, will move into an alignment with Jupiter and Neptune.  Although Jupiter is now moving backwards, the Jupiter-Neptune conjunction remains the critical source of bullish sentiment in the market and it should have enough fuel left to move stocks higher, especially when this slow moving conjunction is triggered by faster moving favourable planets.  I am somewhat skeptical that these planets can effect any upward momentum on Monday since they will not have entered new signs yet.   At Monday’s open the Sun and Moon will be in a potentially tense square aspect while Mercury will be within range of a harmonic aspect with malefic Mars.  So there are a couple of bearish ingredients there that could overwhelm the bulls, if only for a day.  Tuesday and Wednesday looks decidedly more bullish as Venus enters its own sign of Taurus while Mercury prepares to leave Taurus and enter its own sign of Gemini.  It is possible that the market will trade sideways or even decline in the morning, but the Moon moves into aspect with Jupiter-Neptune in afternoon, so that should increase the likelihood that the market will rally. Wednesday also looks quite positive as Mercury (2 Gemini) and Venus (2 Taurus) will form an exact harmonic aspect with each other and with Jupiter-Neptune (2 Aquarius).  The Moon’s position in the morning looks more favourable so we may see more strength at the open.    It’s possible that the rally could lose strength by the afternoon.  Thursday sees the separation of the multi-planet alignment and this loss of optimism could trigger a significant decline, particularly in the afternoon.  While there are no clearly negative aspects in play here, the aftermath of positive alignments often creates a kind of hangover effect that pushes the market lower.  For example, the triple conjunction of benefic planets Moon-Venus-Jupiter on December 1 last year pushed markets down 5% after a big run up in the preceding several trading sessions.   While it is doubtful we will see a sell off that large, I would suggest that this increases the likelihood of some profit taking ahead of the long weekend.  Overall, though, the week should be bullish.

Next week (July 6 – 10) looks more mixed with a significant gain possible on the Mars-Jupiter square on Monday but more choppiness after that.  While the default bias should be bullish here given the conjunction of retrograde Jupiter and Neptune on Friday July 10, I’m not certain how much higher the market can go next week.  Thursday could see a significant gain on a minor Mercury-Jupiter aspect, but Friday could well erase it as Mars approaches Rahu.  The following week (July 13-17) looks quite bullish with Mercury and the Sun forming aspects with Uranus in quick succession, although some profit taking is likely by Thursday or Friday of that week. So if this week does shows substantial gains on the Mercury-Venus as I expect, I think last week’s lows will hold until August and possibly September.   The solar eclipse of July 22 does loom quite large, however, as a signal that we’re approaching the top of this rally in the next few weeks.  Possible dates of a market top could be around July 31 when retrograde Jupiter once again enters sidereal Capricorn, its sign of debilitation.  July 27 and August 13 stand out as possibilities in that regard as they coincide with apparently favourable multi-planet alignments.

5-day outlook  — bullish
30-day outlook — bullish
90-day outlook — bearish-neutral
1-year outlook  — bearish

After a volatile week, the US dollar index closed a little lower to under 80. While I was bullish, I thought there was a chance for an early week gain on Monday’s Venus-Mars conjunction. The dollar did rise towards 81 on this pattern but sold off massively Tuesday afternoon on the effects of the Sun-Pluto opposition. Perhaps the biggest disappointment was the absence of any late week rally on the Mercury-Saturn square. This aspect was notable because it occurred on the angles (22 Leo/22 Taurus) of the USDX chart where similar squares involving Saturn and fast moving trigger planets had produced gains. The failure of Mercury to follow this pattern is perhaps evidence that not all trigger planets are created equal. I also wonder if this bodes poorly for the dollar in the near term given the somewhat unpredictable Ketu-Saturn aspect I have noted in previous newsletters. This week seems mostly negative around midweek as the Sun aspects the natal Ketu while in the 8th house. Some significant gain is likely Thursday, however, so that may limit the downside here. At best, it will stay in a trading range of 78-80 through much of July and a formation of a double bottom with the May lows. But if it moves significantly lower this week (say under 79), then we cannot rule out further downside before it turns around.

The Euro rose above 1.40 last week as the Mars-Venus-Saturn alignment failed to produce much in the way of a decline. The outlook this week looks more positive as the Mercury-Venus aspect will be in range of the natal Jupiter (28 Aquarius). At the same time, the natal nodes may still exert some brief downward pressure since Rahu (29 Cancer) could be in a position to cause some havoc. Even if next week sees a more middling performance for the Euro, the strength the following week (July 13 -17) looks unassaible as both Sun and Mercury will aspect the natal Jupiter. The transiting Venus conjunction with the 10th house Moon in late July may well signal the high water mark for the Euro. This will coincide with Jupiter’s move past its Moon aspect and attention will shift to pessimistic Saturn’s aspect to Jupiter. The Indian Rupee was mostly unchanged near 48 last week against the dollar after weakening in the early going and trading above 48.8. The Rupee seems likely to strengthen further this week and will likely move convincingly below the 48 level.

Dollar

5-day outlook  — bearish
30-day outlook — bearish-neutral
90-day outlook — neutral-bullish
1-year outlook  — bullish

After a major selloff Monday, crude recovered somewhat but still finished down for the week just above $69. While this overall outcome was not unexpected, my forecast was somewhat off the mark since I thought we might well finish lower with Monday’s decline. Monday’s selloff was surprising, although the snapback Tuesday was not as Mercury formed a positive aspect to Jupiter in the ETF chart. Thursday’s rise coincided with the Moon aspect to Jupiter and this was noted in last week’s newsletter. Friday’s decline was more modest that expected, however, as the Mercury-Saturn square never really coincided with the sought after retreat. Despite recent consolidation that shows up as negative momentum on the MACD chart, crude remains fairly strong on a technical basis as it trades well above its major moving averages. It is also well above support levels of recent upward price channels.

This week looks quite positive for crude as the transiting Sun will form a favourable aspect with Jupiter in the Futures chart. Even if we see some selling Monday, this rally may push it back to its recent highs near $72. Thursday is something of a question, however, as Mercury conjoins the natal Rahu in the Futures chart. This could go either way, but it looks like a sizable move nonetheless. Given the bias will be bullish this week, it would be foolish to bet against the continuation of this rally. I am expecting crude to stay strong and move towards $80-90 by July 20. After that, it may be more prone to pullbacks. The Mars-Saturn square around August 9 is another potential turning point and looks like a major move down.

5-day outlook  — bullish
30-day outlook — bullish
90-day outlook — bearish
1-year outlook  — bearish-neutral