Merriman Market Analyst

Review and Preview

Many of the world’s stock indices continued making new al;-time or multi-year highs for much of last week. But as we entered our May 24-25 reversal zone, most of those same markets stopped their advance and retreated as the week came to an end.

In Europe, the AEX index soared to 542.07 on Wednesday, it highest level in several years. Still it is well below its all-time high of 703.18 recorded in September 2000, but well above its 4-year cycle low of March 2003 at 217.80. Likewise the German DAX index also posted a new-multi-year high of 7774.36 last Thursday. This is still down slightly from its all-time high of 8136.16 of March 2000, but up considerably from its 4-year cycle trough of 2188.75 in March 2003. The London FTSE also posted a new multi-year high last Monday at 6675. It is still down considerably from its all-time high of 6950 back in December 1999, but more than double off its 4-year cycle trough of March 2003. But as each of these European indices posted new multi-year highs last week, the same was not observed in the Swiss stock indices. Here the high was 9474.08, which fell short of its all-time high of 9515.26 recorded just recently, on April 26, 2007. From a technical point of view, the AEX and FTSE are exhibiting characteristics known as bearish oscillator divergence, in addition to their intermarket bearish divergence signals during our critical reversal period.

In the Pacific Rim, we see similar divergences unfolding during these same geocosmic reversal signatures of last week. The Australian All Ordinaries index posted another new all-time high last Tuesday at 6390. But by Friday, they closed the week 6273 with their daily stochastic oscillator pointing down and looking bearish. But in Hong Kong, the Hang Seng index fell short of taking out is recent all-time high of 21,077 recorded on May 15. It got to 21,055 last week, before selling off to close the week at 20,474, again with the daily stochastic oscillator pointing down (bearish). The Nikkei stock index of Japan also fell short of its high of the prior week, and still well off from its yearly high of February 26 of 18,300. Its close was 17,481, and further deterioration this week could confirm this market is headed to its 48-week cycle trough in the next two months.

In the Americas, the Dow Jones Industrial Average made yet another new all-time high on Thursday at 13,624. The day before, the NASDAQ Composite made a new multi-year high at 2600, still almost 50% below its all-time high of 5132 achieved in March 2000. On Monday of last week, the Bovespa index of Brazil made a new all-time high at 52,691, up more than 67-fold from its 4-year cycle trough of October 2002. But in Argentina, the Merval stock index rose only top 2223, slightly below its all-time high of 2234 realized back on April 16. In all the cases of the American indices, the daily oscillator levels (via stochastics) have turned down, suggesting that a top of some significance may be in. Can these bearish technical studies be trusted, as they have occurred from crests within three trading days of yet another geocosmic critical reversal date? We will have to see. But historically speaking, such signals have about an 80+% correlation with significant market reversals (i.e. at least 4% downturn from the levels of the highs that coincided with these signals during these geocosmic reversal periods).

In other markets, both Gold and Silver sold off into last week’s critical reversal zone. June Gold fell to 651.50, its lowest price since March 15. July Silver sold off to 1285 on Thursday, which was not even as low as the 1276 level that was seen the prior week. Thus in the previous metals we may be seeing a low form with intermarket bullish divergence in our geocosmic critical reversal period of May 24-25 +/- 3 trading days. The foreign currencies also dropped to multi-week cycle lows last week, while both Crude Oil and Soybeans rallied to their highest level in several weeks. In the case of Soybeans, it is approaching a double top to the yearly high made on February 22.

All in all, many markets are once again flashing signs that they have begun reversals of significance under historically powerful geocosmic signatures, as Neptune turned retrograde and Venus trined Uranus on May 24 and 25 respectively. Let’s see if we get follow through this time.

Short-Term Geocosmics

The Jupiter-Uranus square of May 10 will be translated again by the transiting Sun from June 5 through June 9, as it is first in opposition to Jupiter and then in square to Uranus. The last time something similar occurred was around March 5, which ended the first (and only) big decline in stock prices this year. After making an all-time high around February 26, several of the world’s stock indices plunged sharply for one week into March 5. A setup much like that one could be forming now if stock prices start to follow through on their technical sell signals generated at last week’s highs.  If not, then we may have to wait until that period for another sell signal from yet another high. But adding to the possibility is the fact that the Sagittarius Factor unfolds this Thursday and Friday (Moon transiting through Sagittarius). As described ion our recently released study on “The Sun, the Moon, and the Silver Market: Secrets of a Silver Trader,” this lunar passage has a high correlation to wide price swings in Silver prices. But it also coincides with large price swings in many other financial markets. Further, the Sagittarius Factor in this case will coincide with the full moon.

The Sun in opposition to Jupiter is a very important signature from an historical perspective. Within 10 trading days, there is a 50% correlation to 50-week or greater cycles, as reported in “The Ultimate Book on Stock Market Timing Volume 3: Geocosmic Correlation to Trading Cycles.” Furthermore, there is a 75% historical correlation to primary or greater cycles within that same time frame. It is one of the most consistent and powerful correlates we have noted to major changes of trend in stock U.S. stock indices. In the case of the waxing square between the Sun and Uranus, the correlation to primary cycles is even greater. It has been present in 82% of cases studied when given an orb of 11 trading days. Jupiter rules exaggeration combined with either optimism or hysteria. Uranus rules the unexpected and sudden surprises. Financial astrologers will have yet another opportunity to see if the Jupiter-Uranus square dynamic continues this unusual “blow-off” by breaking above one resistance level after another (as it has since the lows of March), or it suddenly catches - and markets do commence an impressive retreat that is long overdue.

Long-Term Thoughts

The third and final transit of the Saturn-Neptune opposition is coming up on June 25. This will officially end this 36-year geocosmic event from an astronomical perspective. But the effect of the events that transpired during this period will likely loom over the world and financial community for at least another 1-2 years. As we have observed in the past, political and business leaders of the world are subject to much blame for problems related to issues of corruption, dishonesty, deception, and lack of integrity. One scandal after another seems to plague these leaders. We see this happening so frequently today that we are becoming numbed to the phenomenon. In many cases, these leaders either resign or are being forcibly removed. Yet during these same periods, the investor seems oblivious to the potential damage these issues will eventually cause to the global or national business community. Stock markets generally rise during these periods of mistrust and immediately afterwards – for up to 1-2 years. And then the truth comes out and reality sets in. This particular period of “waking up” to the serious of these violations of trust, and the damage that is being wrought on the future, may be especially difficult to adjust to because the Saturn-Neptune opposition is to be followed by the even greater cycle of the Saturn-Uranus opposition in late 2008 through mid-2010. Whereas Saturn-Neptune in opposition doesn’t seem to jolt the world stock indices as it unfolds, the same is not true of the Saturn-Uranus opposition. Here we see more correlations to the even longer-term 18-year cycles than any other geocosmic signature, with perhaps the exception of the Saturn-Uranus conjunction.

Yes, we live in unusual and interesting times. And they are far from over. In fact, the climax of these times is just about to begin, from the U.S.A. election of 2008 through at least 2012. It is likely to be a period every bit as unsettling but enlightening as we experienced the last time Saturn and Uranus were in opposition, which was 1965-1967. You may remember that was the first time that the DJIA touched 1000 (early 1966). It lasted less than 2 weeks before a multi-year and 20+% decline commenced. And it corresponded to a world–wide cultural and social revolution, caused in large part by massive opposition to an unpopular war.