Merriman Market Analyst

Review and Preview

Stock indices throughout the world continued lower into last week. They tried to rally towards the end of the week, but started falling again as the week ended. In the case of U.S. stock indices, the sell off as Friday closed was very sharp.

In Europe, all indices we track were well off their recent highs. The AEX of Netherlands fell to a new low for this cycle at 521.75 on Wednesday, well off its multi-year high of 563.88 back on July 13. The German DAX index was down below 7400 late last week, well off its all-time high of 8151 achieved back on July 13 also. The FTSE of London was also well off its multi-year highs of 6754, also recorded back on July 13. Last week it spent some time below 6200. And the Swiss stock index closed at 8775, well down from its all-time high of 9548 recorded back in early June.

In the Pacific Rim, the All Ordinaries of Australia fell from its all-time high of 6469 on July 13 to 5952 on Thursday, August 2. The Hang Seng of Hong Kong did likewise, falling to 22,144 on August 2, well off its all-time high of 23,557 back on July 26. The Japanese Nikkei fell all the way back to test its lows of last March, plummeting to 16,652 on Thursday, after being above 18,000 just the week before.

In the Americas, The Dow Jones Industrial Average continued falling to a low of 13,132 last Wednesday, August 1, well of its all-time high of 14,022 back on July 17. The NASDAQ Composite also fell sharply, down to 2525 on August 1, more than 200 points off its six-year high of 2724 recorded back on July 19. As of the close on Friday, the DJIA was almost back to the weekly lows, closing at 13,182.

Each of these indices bottomed within three trading days of the July 31 critical reversal date as identified in our MMA Cycles report. In fact, most were only one day off. But the rallies that followed have not been sustained as the week ended, leaving some doubt as to whether or not they will hold next week. On the bullish side, the daily momentum indicators are oversold and making a pattern oftentimes seen at new cyclical lows. On the not-so-positive side, Venus continues retrograde through early September, and most of these multi- and all-time highs were posted within 12 trading days of that event (July 27), a time when we anticipated that long-term cycle highs in many stock indices would culminate.

In other markets, Crude Oil managed to make a new all-time high on Wednesday, August 1, reaching 78.77. But then it started to sell off, which is not so unusual, especially given that this is right within the same critical reversal period, and prices were testing the previous all-time high. Gold and Silver had modest rallies last week, after bottoming right on the Venus retrograde date the week before. The possibility thus exists for more rallies to come as the Venus retrograde period continues into early September.

Short-Term Geocosmics

The major geocosmic signature in effect right now is the Venus retrograde, July 27 through September 8. Typically we look for a long-term cycle high or low to form within 12 days of the retrograde event, and then for many markets to embark on counter-trend moves into the direct period, +/- 10 trading days. As stated in last week’s column, “For the short-term, the high of the 4-year cycle could very well have been put in on July 17 when the DJIA topped out at 14,022. That was within 12 trading days of Venus turning retrograde, when primary or greater cycles unfold with 78% regularity (that’s huge!).” We also note that on July 27, Gold and Silver made a successful re-test to their primary cycle lows of late June. If Venus retrograde holds as it has oftentimes in the past, then those lows of July 27 should act as strong support on any downturns.

But the next two weeks should be very interesting. First, there are two Jupiter transits of some importance in effect right now. On August 2, the Sun formed a trine to Jupiter, and on Monday, August 6, Jupiter will turn direct. These are usually indicative of rallies in stocks, but they are not that strong in terms of cycle types that form. In other words, rallies into these periods may be corrective in nature, for they only rank as “level 3” and “level 2” types according to our studies reported in “The Ultimate Book on Stock Market Timing, Volume 3: Geocosmic Correlations to Trading Cycles.” Venus retrograde, on the other hand, is a powerful “level 1” type, the most powerful type of correlation to a primary or greater cycle in U.S. stocks. Thus we saw some attempts to rally off the lows last week, and there were times that the rallies were quite strong. But they didn’t last, which suggests there could be further declines this coming week, and possibly even into early September. In fact, it is even possible that if the market declines into Venus direct, the amount of the decline could eventually reach 10% and maybe even 20% from the July 17 highs, for it may even coincide with the 50-week and 4-year cycle troughs. Both of these are due any time by the end of this November – unless they already occurred in either October 2005 or July 2006. As discussed before, I don’t think they bottomed then because those declines were only 7.5 and 8.5% respectively, whereas historically there have been no cases of such 4-year cycle declines being less than 12%. Thus the most logical question is: will the decline end by the time Venus turns direct, or will it extend out to October-November?

Many analysts think the market is ready for a powerful reversal and will rally right now, probably based on the technically oversold condition of the market. They may be right, but with Venus retrograde, technical studies have a tendency to be unreliable, just as when Mercury is retrograde. We may know the answer to this between August 13 and 27, when both the Sun and Venus conjunct Saturn, and form an opposition to Neptune. You may remember prior columns dedicated to the 36-year Saturn-Neptune opposition, which finally ended June 25. Well, the themes of that signature are still with us while Mars, Venus, and Sun still transit in aspect to these two planets. Mars has just finished that “translation” this past week, and the market did make low, albeit possibly only a temporary low. But the Sun and Venus now follow in 1-3 weeks, which leaves open the possibility of another slam down during that period. On the one hand, they could also produce a reversal (i.e. rally) since the market is indeed oversold. At the very least, the same depressing themes that dominated the entire last year under Saturn-Neptune opposition, return to the news: ethics violations and cover-ups by our leaders, denial of responsibility, efforts to harm the reputation of others by creating false impressions based on inaccurate or misleading facts, and of course problems with sub-prime lenders. The wish for honor and accountability remains very strong, and without it, politicians and business leaders continue to languish in the distrust (and disgust) by the public.

Long-Term Thoughts

I will make this very brief this week. I note that Hillary Clinton’s campaign is growing in popularity, according to surveys reported in several newspapers this past week. You may remember that almost two years ago, this column suggested that she would make a strong bid to become the next president, and based on the U.S.A. Mars turning retrograde in its progressed horoscope, she might very well succeed. Mars is a masculine planet, and a planet ruling combat and war too. The idea was that the U.S. would start to move into a less militarily aggressive mode over the next 72-80 years (starting in 2008-2009) preferring to build and secure its own borders rather than to engage in the conflicts of other nations on their soil. But there is something simple to realize about Hillary Clinton, based on the fact that she is a Scorpio sun sign (October 26, 1947, about 8:00 AM, Chicago, according to C. Longacre, from questioning her mother). There are basically two types of world leaders: those who actually lead, and those who manage. Based on my understanding of astrology, Hillary falls into the later category. She is manager. The question voters will be asking themselves in the next election is: do we need a leader, or do we need someone who can manage the situation well? All the candidates seem to be trying to convince everyone that they are “leaders.” George W. Bush was a “leader.” But was he an effective “manager?” Hillary, in my opinion, is not a “leader,” but rather a “manager.” As a Scorpio, she will be sensitive (maybe oversensitive) to other people’s values. She (like her husband Bill) will always want to know what others think… what do the polls say… and will likely adjust her decision-making around those polls, which is what effective managers oftentimes do. So this question is: will she be an effective manager, or someone who gets lost in the conflicts oftentimes posed by polls that reflect incompatible positions on various issues?