- Sharp rally possible this week above Dow 9000/SPX 930 and Nifty 3000/Sensex 10,000
- Rally may not last into next week
- Gold prone to declines, esp. towards end of week
- Crude to rise against US dollar
- Sharp rally possible this week above Dow 9000/SPX 930 and Nifty 3000/Sensex 10,000
- Rally may not last into next week
- Gold prone to declines, esp. towards end of week
- Crude to rise against US dollar
All indications this week point to a very strong rally, probably over Dow 9000 and perhaps reaching as high as 9500. With the Monday holiday, and many investors soaking up the experience of the historic Obama inauguration Tuesday, market activity will be compressed this week with most of the rally likely occurring from Wednesday on. I’m not sure about Tuesday, as their are indications that could see a decline or a rise. In any event, investors should not be overly concerned if the market falls on Tuesday. If the market is negative Tuesday, then it will offer a last chance to take long positions. Astrologically, the proximate cause for the Obama rally will the conjunction of Sun, retrograde Mercury and Jupiter in the nakshatra of Uttarashada, which is ruled by the Sun. In addition, Venus is applying to a conjunction with Uranus, opposite Saturn. Both of these configurations will come exact around the same time, Thursday for the Venus-Uranus, and Friday for the Sun-Jupiter and will create a multiplier effect for the rally.
With a fairly negative looking solar eclipse due for next Monday January 26th, and the Mercury-Mars conjunction a couple of days later, this rally is unlikely to last very long. It may linger into next Monday or Tuesday but I think the air will largely be coming out of it by then. Next week will likely see the Dow back under 9000 again and then some. This week’s rally is likely to be the last time we will see the Dow over 9000 and the S&P over 930 until perhaps March or April as I am expecting a significant decline and consolidation pattern forming in advance of the next spring rally. Calling the low will be the next major challenge, and it seems that the March 23 aspect between Jupiter and Saturn is one distinct possibility. If we retest the November low of 7400, then this spring rally could be very powerful indeed and run well into summer taking the Dow over 11,000. Buy and hold investors should be extremely cautious about taking long term positions in advance of the spring-summer rally. Sentiment is likely to swoon yet again in the Fall of 2009 and likely make significant new lows. I will discuss the most likely dates for the Feb/Mar lows in advance of the spring rally in coming newsletters.
Trading Outlook: Take long positions on Tuesday, especially if the market is down or hesitant about moving up. The rally is unlikely to extend much into next week so book any profits quickly. Friday would be a prudent time to cover long positions in advance of any turbulence that accompanies Monday’s solar eclipse. Short positions may also be entered into on Friday, or during any time after the rally has moved sufficiently far enough. It’s conceivable we could see the SPX as high as 1000 (Dow 9600), so investors may have to be careful about shorting too soon. Waiting until the end of the week regardless of price levels may be a more prudent approach.
Stocks in Mumbai fell 2% during a volatile week in the wake of the Satyam scandal. As the Sensex closed at 9323 and the Nifty at 2828, Indian stocks moved below their 50 day moving average but managed to stay above the 2750 level. While I had expected a decline as low as 2750, some of my daily calls were off the mark. The Mercury-Saturn aspect was largely responsible for Thursday’s sell off and the proximity of Mercury to Rahu accounted for the early week negativity. It was heartening to see Friday’s rise as Mercury moved closer to benefic Jupiter. Wednesday’s gain remains unaccounted for, although the Moon’s applying aspect to Venus may have had a hand there in offsetting the prevailing bearish configurations.
With the approach of the Sun, Mercury, and Jupiter conjunction in Uttarashada, we can expect a significant rally in Mumbai this week, perhaps pushing the Nifty above 3000 once again. Generally, the early week looks more tentative than the late week. One would hope Monday might be somewhat positive given the approach of Mercury to Jupiter and yet we need to be cautious given a potentially damaging Mercury-Pluto aspect. Tuesday looks more solidly positive, especially in the morning, as the Sun applies to Jupiter and switches places with Mercury. While Wednesday to Friday look mostly positive, we may see some kind of pullback, however temporary, on Thursday afternoon towards the close. If Monday is positive, then we could see the rally take the market back towards 3150 on the Nifty and 10,300 on the Sensex. If the early week is more tentative, then our targets should be somewhat lower.
With the approach of the malefic solar eclipse on Monday January 26th, this rally may not continue very long into next week. Mercury and Mars will conjoin on Wednesday Jan 27 in bad aspect to the natal Mars in the Nifty chart, so that is additional reason to be very cautious about any rally here. By the beginning of February, stocks may have erased the gains from this week’s rally as they will surely revisit their lows from last week (Nifty 2750, Sensex 9000). A larger move down is in the cards here, with much of February looking very bearish indeed. A retesting of the October lows of Nifty 2525 seems likely in February. March is shaping up to be the possible near term low after which we will see a rally of considerable more strength and duration into the summer.
Trading Outlook: If Monday’s action is bearish, it will present investors with an opportunity to go long for what should be a fairly positive up week for equities. Since the rally is unlikely to last into next week, profits should be booked quickly, perhaps on Thursday or Friday, or at the latest next Monday. The rally will likely also offer a good medium term shorting opportunity for the coming weeks as the market is likely to retrace back to October lows in the next two months.
As expected, the US dollar continued to strengthen last week against most currencies as shaken confidence pushed more investors to seek safety in dollar-denominated instruments. Even with a strong bounce Friday, the Euro fell 2 cents last week and closed below 1.33. With stocks likely to rally this week, we should see the Euro rise strongly, perhaps making a run at 1.40. This possibility is reflected by the Sun, Mercury, Jupiter conjunction occurring near the 5th house cusp in the Euro natal chart, aspecting the ascendant. Next week should see the Euro fall back down toward current levels as Mars will aspect the natal Saturn. The Rupee was largely unchanged last week, after trading around the 49 level for much of the week and recovering back to 48.5 on Friday. Some further strengthening is very likely this week, with 47.5-48 quite possible.
In light of the economic gloom still haunting financial markets last week, crude oil once again fell sharply below $40 and closed around $36 for the February contract. This bearish performance was largely in keeping with our forecast, as Saturn remained in a weakened state and the Futures chart suffered from a significant Mars affliction. We can expect to see crude rise back above $40 (February) this week as transiting Venus aspects Saturn and provides a shot of adrenalin to crude. The Futures chart is more mixed as Sun and Jupiter move into a potentially tense aspect to the natal Moon-Saturn conjunction. While the ambiguity of this chart may offer some caution to a bullish forecast, generally I think crude will go significantly higher this week, with $50 possible on the March contract. As with stocks, it is likely to come off those levels fairly quickly.
With the rise in the US dollar, Gold declined last week as it traded below $810 at the height of the market pessimism midweek before rallying Friday to end around $840. I think Gold may have some early week strength, but it seems liable to decline later on. It is possible that the decline may begin as soon as Tuesday and there is the chance that the decline may be quite steep, perhaps below $800. Overall, gold should be lower for the week. I remain bearish for gold in the near term.