Merriman Market Analyst

Review and Preview

 The majority of world stock markets were up again last week as we completed the first of three back-to-back critical reversal zones that extends through May 26. Many of these indices came down into the midpoint of this first reversal zone, which was on April 22, and then rallied into the end of the week. In many cases, this rally took the indices to their highest levels since the lows of January 22 or March 17.

 In Asia and the Pacific Rim, all four markets we track soared to their highest levels since March 17. Both the Japanese Nikkei and India’s NIFTY rallied all week, topping out at 13,886 and 5117 respectively on Friday. This represents gains of 18.7 and 14.5% respectively in the past month.  The All Ordinaries of Australia topped out on Wednesday at 5712, up 11.3% from its 5130 low on March 17. But the stellar performer was the Hang Seng Index in Hong Kong, which soared 25.7% from a low of 20,572 on March 18 to a high of 25,861 last Thursday.

 In Europe, the pattern was similar, but not so strong. Two of the four indices we track made new cycles highs on Friday. The London FTSE index soared to 6098 on Friday, a gain of almost 9% in the past month. The German DAX was the strongest, gapping up on Friday to 6945 for a gain of 12.6% since the 6167 low of March 17. But neither the Netherlands AEX nor the Swiss Stock Index (SSI) were able to make new monthly highs on the last week’s rally, thus creating a possible case of intermarket bearish divergence in this reversal zone.

 The U.S. stock markets performed well too. The Dow Jones Industrial Average and the NASDAQ Composite both made new cycle highs on Thursday. In the case of the DJIA, the 12,942 high on Thursday represents an 11.24% gain from the lows of January 22. The 2447 high in the NASDAQ Composite is a 13.5% appreciation since its primary cycle low of March 17.

 But the greatest example of this part week’s reversal signature was noted in the currency market, especially the euro currency against the U.S. Dollar. On April 22, our exact reversal date, the euro currency topped out with yet another new all-time high at 1.6018. By Friday, it was in the mid-150’s. This may be the start of something big over the next month or so. In other markets, Crude Oil also made a new all-time on April 22 as it touched 119.90. It didn’t sell off much, however, but our time band remains in effect for the all-time high to be completed anytime before the end of May. Gold and Silver both sold off last week to their lowest level since April 1, with the appearance of falling lower as we approach the time band for Gold’s 11.33-month cycle trough, due before the end of July.

Short-Term Geocosmics

 The only thing traders need to know about this coming week is that Saturn turns stationary direct on Friday, May 2 – the day the Employment reports come out. It will mark the end of the second reversal zone of this period that extends to May 26. Saturn direct is a Level 1 signature (highest correlation to primary type of cycles), with a 70% correlation to primary or greater cycles within 9 trading days. But in this case, we are not in the time band for a primary cycle – at least not a primary cycle trough. We are in a time band for a major (5-8 week) cycle trough.

 The most important thing to recognize about major Saturn signatures is this: any financial market that is declining into a period of one day before through one day afterwards, has a high potential of completing that decline and starting a rally. The fact that Saturn direct happens on the Employment reports day may mean the news is very gloomy (but we already expect it to be gloomy, so maybe it is more than gloomy – like maybe it is frightening). In this case, if the world stock markets (or any other markets) decline into May 1 +/- one trading day, then the rally that follows could be quite substantial, because the next geocosmic signatures are Jupiter turning retrograde on May 9, followed by the Sun-Jupiter trine of May 12. Just as Saturn correlates with the end of declines, Jupiter signatures can correlate with the end of rallies. They don’t always behave this way, but when they do, an ideal set up presents itself for trading. And of course we will monitor this development closely – and give our formal recommendations for various markets that unfold in this “ideal set up” formation - in our daily reports.

Longer-Term Thoughts

 “Fear Sells.” It’s a mantra that I have written about for the past 7 years that would dominate public consciousness throughout this decade, and into the next. It is the mantra politicians will exhort more and more in their quest to get voters to vote against their opponent (and for them). It is the mantra of negativity that doesn’t really win elections, but rather defeats the other side by placing doubts into voter’s minds about the electability - or the ability to govern fairly in regards to the needs of all the people - by the opponent. In the study of astrology, the concept of “fear” is ruled by Saturn. And for only the fourth time in the past 200 years, Saturn is forming an opposition to all three of the planets outside of its orbit within only ten years. In the present decade, Saturn started this “triple opposition” period with its 32-37 year opposition to Pluto in 2001-2002. That is when the “fear sells’ mantra of modern-day politicians began. Or, at least it notched it up to an entirely new level. The second phase happened in 2006-2007, when Saturn entered its 36-year opposition cycle to Neptune. That was also the time of massive fraud and deception – in business and politics – which would take 1-3 years to be revealed. Those fraudulent and deceptive practices are just now coming out into the open. And the last Saturn opposition is the 45-year cycle to Uranus, which occurs 5 times between November 4, 2008 and July 26, 2010. Not only does “fear sell,” but also “fear defeats,” which means the person who instills the most “fear” usually ends up the victor when a vote is needed to decide the outcome in a election between two (or more) people. At least it is that way for most of this current “Triple Saturn opposition” period (2001-2010, or even longer).

 I bring this up because we are in the beginning stages of one of the most heated presidential races in the history of the United States. And the first passage if the Saturn-Uranus opposition – November 4, 2008 – is on the day of that Presidential Election. On Friday, April 25, the “What’s News” section on the front page of the Wall Street Journal, posted two pertinent snippets. The first stated that “The U.S. said it found Iranian arms caches in Iraq…. The charges mark a hardening of U.S. rhetoric on Iran, which it now calls the greatest long-term threat to Iraq.” Does it sound like the trumpet roll to… “Fear Sells,” as we approach the campaign season?

 The second article states, “U.S. Intelligence officials said there had been at least a decade of cooperation between North Korea and Syria to build a nuclear reactor.” This came out on the day that the Bush Administration released photos of a nuclear reactor in Syria that Israel destroyed last September 2007. According to these intelligence reports, the facility was built with the aid and cooperation of North Korea. In other words, the United States is in grave danger – still - from not only Iran, but also Syria and North Korea. But why release these photos and this intelligence report now, almost eight month after the fact? Why harden the rhetoric now with Iran, after the so-called “troop surge” was just reported as being successful? Isn’t violence down in Iraq since the White House approved the troop surge a year ago? Well, yes, but…. “Fear Sells.” And we have an election coming up. And if the polls don’t show a certain political party in the lead as the election gets closer and closers, then… well, wouldn’t current political leaders need a reason to start something that may really drive home the point that you really do need a president who can keep you safe? One who can protect you against your “Fears?”

 So let the posturing commence, and along with it, a lot of “new intelligence” suggesting the imminent danger Americans are in (as if we forgot). And if that doesn’t work, let’s look at the “fears” about the economy. After all, Friday’s Consumer Confidence numbers were at the lowest level in 26 years. That would mean 1982 – the year that ended a rather harsh recession (and under a Saturn-Pluto conjunction). Yes, people are afraid about the future of the economy. And yes, at recession bottoms, confidence is always at its lowest point in the cycle. These are the two big “fears” to be drilled into us in the coming months: the fear of war and the consequent loss of our freedom, and the fear of an economic collapse wiping out our financial security, probably exasperated by higher taxes. Friday’s Wall Street Journal also had an editorial about the economy, pointing out that the U.S. Corporate tax rate is currently the second highest in the world after Japan, and that is what is “… driving investment and jobs overseas.”

 Why is it that major elections – and leaders of political parties – seem to no longer inspire confidence and hope? Maybe, just maybe, with Saturn in opposition to Uranus, one candidate can emerge who will break this depressing pattern of 21st century America. After all, Saturn represents patterns, and Uranus represents change and the breaking of old ways. Saturn also represents the old guard, and Uranus represents youth. This election will likely be about those two opposite ends of the spectrum. There should be a real clear distinction between the candidates this time - about as clear as black and white, young and old, and maybe hope and fear.