Merriman Market Analyst

Review and Preview

  What a difference BB&P (Ben Bernanke and Paulsen) – the new “Fire Sign Theatre” of our generation - make in today’s financial markets. Just one month ago many of the world’s equity and financial markets were on the verge of spinning out of control. A financial panic was brewing. By August 17, stock markets were down double digits from their all-time or multi-year highs realized in mid-July. Precious metals, crude oil, corn and soybean prices were all making primary cycle lows. Fear swept briskly through the investment community as one sub-prime lender after another went under. And then on August 16, BB&P went into action. First they injected a ton of money into the system to help ease the credit crunch. Then our two “fire sign men of action” orchestrated the reduction of the FED discount rate. And just to make sure investors took them seriously, they lowered the FED Funds rate on Tuesday by a half percent, when most were expecting a reduction of only a quarter percent. Wham! Just like that stock markets around the world were back to the multi-year and all-time highs. Crude oil and wheat are making all-time highs. Gold is back to its highest level in 27 years. And the Dollar has fallen to a new historic low against the Euro currency.

The message? Despite their talk of being concerned about inflation, it is absolutely more important to make sure the economy does not go into a recession. Their patience for such a threat is no more than one month – which is somewhat typical of strong fire sign personalities. After all, we are talking about an Aries and Sagittarius: macho-men. Men of action. They aren’t going to sit around and let market forces work things out in their own natural rhythm. Not on our watch. Not if we can do something now to stop this madness. To hell with fighting inflation or reporting money supply figures. We’ve got a guerrilla war on our hands to fight. Fire signs: strong on action, low on patience, and worry about today - not tomorrow. Let the good times roll! We’ll deal with the hangover (inflation, worthless currency problems) later.

 In the United States, the Dow Jones Industrial Average soared to a high of 13,877 on Friday, up 1360 points (10.8%) from the lows of August 16. I believe this is enough to confirm the August lows as the 4-year cycle trough. If correct, the stock market will go higher- much higher – into 2008, before it falls back to the lows of August again. The NASDAQ Composite rallied to 2683 last week, up 12.4% now in the last 5 weeks. Interestingly enough, neither the NASDAQ or S&P made a new cycle high on Friday as the DJIA did, which could be suggesting a pullback is about to begin.

 In the Far East and Pacific Rim, the stellar equity performers were in Hong Kong and India. The Hang Seng skyrocketed to a new all-time high on Friday at 25,893, up over 6500 points and 33.5% from its 4-year cycle low of just 5 weeks ago! India’s NIFTY index was right behind, soaring to its highest level ever at 4855 on Friday, up over 21% since August 21. Australia’s All Ordinaries has now risen 16.9% over the past month. Only the Nikkei index failed to appreciate double digits on this recent rally from its lows of August, but was still up a respectable 8% in the past month.

 In Europe, the rallies were not quite as great – at least not in Zurich and Germany, where the Swiss stock index and DAX only appreciate a little more than 8%. In London, the FTSE reached 6512 on last Wednesday’s reversal date, for a gain of 11.8% off the August lows. And the Netherlands AEX rallied to 545.56 on Friday, for an appreciation of 14% over the lows of five weeks ago. But all of these indices were well below their highs of the year.

  Another stellar performer last week was crude oil, which exploded for another new all-time high with its 83.90 mark on Thursday. This was a gain of 22% from the lows of August 21. In fact, crude oil is now up nearly 70% from its 4-year cycle low of 49.90 back on January 18 when Jupiter and Uranus formed their first of three square aspects this year. The third and final one will take place on October 9. The second one on May 10 also coincided with a primary cycle trough. Almost as impressive as crude oil has been the move in Silver prices, which rallied from 1128 back on August 16 to 1368 on Friday, for a gain of over 21%. Gold is up over 14.6% in the same time frame. But in the case of Gold, prices are now at their highest levels since the all-time heady high days of early 1980. The Euro currency also raced to new all-time highs last week.

Short-Term Geocosmics

 So what was so special about last week? Heliocentric Mercury in Sagittarius (September 11-22) and the Moon in Sagittarius (September 17-19, also known as the “Sagittarius Factor”). Remember Sagittarius and its ruling planet Jupiter has in common the theme of exaggeration and expansion. It is not so unusual to witness strong rallies (or collapses) when the two ingresses are happening simultaneously. There was also a T-square between Sun-Mars-Pluto last week too, the midpoint of which occurred on September 19. That happened to be the day that several indices made their high of the week.

 For this week, the major geocosmic indicator will occur on Friday, September 28, when Mars moves into Cancer. This will conjunct the natal Pluto, oppose the natal Sun, of the Federal Reserve Board chart (created on December 23, 1913). We can anticipate reversals in interest-rate related markets at that time, and perhaps some criticism directed towards BB&P for their “aggressive” actions as of late. Right now they are heroes for acting aggressively. That honeymoon will end as soon as economic indicators point out the inflation is starting to rise.

Longer-Term Thoughts

 So let’s talk about that. When are prices going to rise? When will we see signs of inflation starting to grow? And will it be gradual as we have complacently come to expect?

 If you ask people who trade precious metals, they will tell you that inflation is already here. If you ask people trading in soybeans, wheat, or crude oil, they will tell you the same. If you ask people in the currency markets, they will point out that the United States is for sale, and the dollar is rapidly losing is purchasing value. It’s just a matter of time before business leaders of the world will no longer want to accept payment of the U.S. dollar for its goods. Its days as the standard world currency are slowly fading into the sunset. And a generation after that may be the demise of English as the world’s standard language. One follows the other.

 On January 26, 2008, Pluto will begin a 15-year sojourn through Capricorn. It will conjunct the natal Sun and oppose the natal Pluto of the Federal Reserve Board chart, located at 1 and 0 degrees of Capricorn and Cancer respectively. It will also oppose the natal Venus-Jupiter conjunction located in the early degrees of Cancer in the United States of America chart. Venus rules a country’s currency, and Jupiter with Venus, its wealth. Pluto as a transit can pose a “threat” to the areas ruled by the planets it aspects.

 At the same time (2008-2009), Uranus will pass over 21 degrees of Pisces. Uranus rules the unexpected, and a time in a person’s life when things can spin out of control. Mr. Bernanke’s natal Moon is around 21 Pisces. His natal Sun and Jupiter are at 21 Sagittarius and Gemini respectively. That’s right: they are in a T-square, and Uranus is touching it off. By November of 2008, transiting Saturn will be at 21 Virgo, thus completing the grand square to his natal planets and transiting Uranus.

 So, does this suggest a period of slow, moderate growth, with inflation under control? I don’t think so. It may be fine for awhile, maybe into the first half of 2008. But once we get to late 2008 through 2009, inflation could grow like… why, wild fire! I wonder what our fire sign “men of action” will do then. Well, interestingly enough, Paulsen’s chart shows no great stress. His term is over, along with Mr. Bush’s. But Mr. Bernanke, the Federal Reserve, and the United States of America are another story. By that time inflation could be in the double digits, Gold could be in the 4 digits, and the DJIA could be in six digits.

 The best quote of the week comes from former FED Chairman Alan Greenspan in Tuesday’s “Wall Street Journal.” In his memoirs released this week, “Mr. Greenspan takes the President and Republican lawmakers to task for presiding over an explosion of federal spending. He also praised former President Bill Clinton’s stewardship of the economy, particularly his effort to slash deficits. ‘I think we’ve lost our way,’ Greenspan added. ‘I think that Bill Clinton was the best Republican president we’ve had in a while.’”