Merriman Market Analyst

Review and Preview

Welcome to Venus retrograde. And welcome to the downside phase of the 4-year cycle in world stock indices. As discussed in several issues of this column, this cycle trough is due by November of this year, and now – at last – it is finally happening.

Equity indices around the world fell hard last week, until the Federal Reserve Board announced    a half-point cut in its discount rate just before the U.S. markets opened Friday morning. Just prior to that, almost all indices were making new multi-month lows. In the Pacific Rim, where the markets were already closed for the week when the FED made its surprise announcement, the Japanese Nikkei had plummeted to 15,262 down nearly 1500 points from the prior week’s close. In fact, the decline was to its lowest price in over a year, and down 16.5% in just 6 weeks. The Hang Seng of Hong Kong fell to 19,386 intraday on Friday, down over 4000 points and 17.5% from its all-time high of 23,557 recorded on July 26. On Thursday, the Australian All Ordinaries fell to 5490, down 15% from its all-time high of 6469 back on July 13.

In Europe, the FED announcement occurred during market hours, so after posting new cycle lows earlier in the day, all rebounded smartly by the close. The Netherlands AEX fell to 479.49 before the announcement, a decline of 15% from its all-time high of 563.98 on July 13. It closed at 499, up 20 points from that intraday low. The German DAX did not fare quite so well, closing only at 7270 after posting an intraday low of 7240. However that decline was only off 11% from its all-time high of 8151 back on July 13. The decline in London’s FTSE was more dramatic, with the index falling to 5821.70 intraday on Friday, off 13.8% from its multi-year high of 6754 posted on the same July 13. But it rebounded over 200 points after the FRB rate cut to close the week at 6064. In Switzerland, the Swiss stock index was down to 8386 during the day on Friday, off over 12% from its all-time high of 9548 on June 4.

The pattern was similar in the Americas, except their lows were posted on Thursday, before the FED announcement. The Dow Jones Industrial Average fell to a new cycle low of 12,517.90 that day, down from the all-time high of 14,022 on July 17. That is a decline of 1504 points and 10.7%, thus making it the steepest decline in actual and percentage terms of the 4-year cycle which began in October 2002. There should be no doubt now that the 4-year cycle did indeed top out on July 17, as previously suspected. The next challenge is to determine when this cycle will bottom. Most of our studies suggest that it could be completed by the end of November 2007. It could have even happened last week, for the decline has now been over 10%. However, as stated many times before, in 85.7% of historical cases studied, the decline has exceeded 20%. If we are to go to 20+%, then last week’s low was only a halfway point. In the NASDAQ Composite, Thursday’s low of 2386 was 12.4% below its multi-year high of 2724 back on July 19. In South America, the Bovespa plummeted to 44,937 on Thursday, a whopping loss of 22.9% from its all-time high of 58,292 on July 20. The Merval index of Argentina fell even more. It traded as low as 1751 on Thursday, down 25% from its all-time high of 2303 on July 23

The point is that all of these indices were down 10-25% from their recent highs, and a sense of panic was evident throughout the world financial community. It spread to precious metals and currency markets too, both of which made huge moves last week (especially the Dollar-Yen, which fell to below 1.1200 at one point). And then the FED acted. The sharp declines were entirely consistent with principles of Financial Astrology. As stated in last week’s column, “The next two weeks should be very interesting. The Sun, Mercury and Venus will all form a conjunction to Saturn and opposition to Neptune between Monday’s new moon (August 13), and August 27. Since the 36-year Saturn-Neptune opposition was the dominant aspect of this year, and officially ended June 25, these aspects in effect “translate” over that opposition point. Thus we should see market behavior similar to what we observed during the opposition periods of February 28 and June 25. You may remember that the stock markets fell very hard during those two periods – just like they have been falling recently.”

Short-Term Geocosmics

The low of last week was within three trading days of the midpoint of the August 13-25 geocosmic cluster (we referred to it earlier as August 27, since August 25 is a Saturday). This is also the period of time in which the Sun, Mercury, and Venus all “translate” over the recent Saturn-Neptune opposition of June 25, thus re-igniting the principles of that period. But in this case, the declines (the volatility) were even more dramatic because Mars is cruising towards its opposition to Jupiter. Mars is the principle of “action” in astrology, and Jupiter the principle of “exaggeration.” So when they come into opposition, the surrounding period can correlate to “Big Range” days. As stated as week, “We will also be closely watching the period around August 23 when Mars forms a powerful opposition to Jupiter. Within a couple days of that, I would expect the stock market to have another extremely “Big Range” day – 300 points up or down, maybe both.” Well, we are certainly witnessing that already. During the day on Thursday, the DJIA was down over 300 points intraday before reversing. And on Friday, one day later, the DJIA was up over 300 points intraday. This signature indicates there is more to come this week. That is further supported by the “Sagittarius Factor,” which is in effect August 21-23. Like its ruling planet Jupiter, the sign of Sagittarius also rules exaggeration. This should continue being an exciting time for day traders, who thrive on large intraday price swings.

Long-Term Thoughts

As the financial markets undergo their greatest volatility in a long time, it is important to keep in mind certain geocosmic and cyclical signatures that are now in effect. Venus is retrograde July 27 through September 8, and Venus is translating the Saturn-Neptune opposition points. In our July 30 column, as Venus was just turning retrograde, we stated, “In fact, one of the common occurrences noted historically during the times of Venus retrograde is that (some) Central Banks suddenly reverse their policies, and start floating messages that they will switch from being accommodative to restrictive, or vice-versa.” As the markets fell hard last week, it was due to the fact that credit was tightening for banks, due to the sub-prime woes. Restrictive credit is not good for financial markets, and institutions and individuals needed to raise cash, so they sold assets – like stocks and precious metals. But during the week, central banks started to inject cash (liquidity) reserves into the system. And then on Friday morning, they released a powerful market stimulant by suddenly lowering their discount rate by a half-point. From the lows of Thursday, stock indices reacted wildly – and positive. This is clearly a signature related to the principles of Venus retrograde, as discussed when the phenomenon began.

But it all happened as stock markets were in the process of confirming their 4-year cycle crest, and falling to their 4-year cycle trough. This double digit decline was due to happen in this primary cycle. As also stated in that same July 30 column, “So where does this leave us in terms of cycles in stock indices? Has the 4-year cycle finally topped out? Or is this just another “fake out,” to be followed by another rally to new highs in the next few weeks? Time is running out for the 4-year cycle. It has to happen in this primary cycle… If we don’t get a 10+% decline by the end of this November, then we will have to re-label our cycles to reflect that the 4-year cycle bottomed in either October 2005 or July 2006. If that is the case, it will be the first time in the history of the DJIA that the index did not fall at least 12%. Those two lows represented declines of only 7.5% and 8.5% respectively. In over 85% of 4-year cycles dating back to 1893, the decline has exceeded 20%. It is still my bias that this market will fall at least 10%, and perhaps more than 20%, by the time this new primary cycle ends.” Thus we have a case where the study of financial astrology and cycles ended up working out in real time, just as they should. The 4-year cycle topped out within 12 trading days of Venus turning retrograde. The only question remaining is whether the equity markets will bottom now, as Venus forms these critical aspects to Saturn and Neptune, or will the bear trend continue into 10 trading days of Venus turning direct? Or will we instead see a rally into the Venus direct period for a new primary cycle crest, followed by yet another decline to lower prices by the end of November? From this week through early September, we will also experience Mars in translation to the Jupiter-Uranus square. The market volatility is likely no where near an end. And these signatures also suggest the presence of potentially very powerful hurricanes – especially September 1-10. I would suspect this could correlate with sharply rising crude oil prices too. And then what will the FED do? Fight inflationary pressures (raise rates) or protect against an economic slow down (lower rates)? When given the choice, I believe they will always opt for the later, despite their speeches to the contrary.    After all, FED chair Bernanke is also a Sagittarius. He wants growth, not slow downs.