The Dow Jones Transport
index and the Russell 2000 have collapsed, removing the potentially
Bullish set-up of positive intermarket divergence in the main United
States indices.
American markets may bounce briefly
early this week, but severe technical damage has been done to charts
worldwide since the last World
At Large report on September 21.
In that report, I indicated the conditions
were ripe for the rally to continue and laid out two primary scenarios
– and two alternatives.
I also indicated that narrowing Bollinger
Bands on the weekly chart of the DJT “is a sign of an
approaching sudden move”. Displaying the DJT’s
monthly chart for further analysis, I indicated the most recent
price Highs “were not endorsed by new highs in any one
of our three indicators” and that the move was likely
to be down.
The first of the two Alternatives
to the primary scenarios I outlined was this: “The first
of these is that we’ve just witnessed a massive blip going
into options expiration and that the rally is a first degree countertrend
(1 to 4 days) which will fail by Tuesday and the markets will resume
their freefall.”
As it turned out, it failed on the
third day – massively – and took down the Transports
and the Russell 2000 with it. And worse was to come, not only in
the US, but also in Europe where a bank a day has been collapsing
for the past two working weeks.
We now appear to be within the final
downleg of this stage of the Bear and the risk of a crash-like decline
is extremely high.
Given Wall Street’s manic mood
swings, frankly anything is possible.
The primary downside target for the
Dow Industrials is a mere 600-or-so points below Friday’s
close – and the timing target for a bottom is only 5 to 11
trading days away.
However, given the irrational and
emotive plunges and bouncebacks and the fact the DJI is swinging
around by almost that much in a couple of hours, it could overshoot
to the downside by another 1000 or 2000 points.
The panic on Wall Street and Capitol
Hill verges on hysteria with otherwise sane columnists and analysts
screeching “socialism”, “fascism” and “moral
hazard”.
Frankly, some of us who Out Here watching
American Congressmen vote down the Club Fed bailout on a “principled”
position to protect the taxpayer from rorts and then watching them
change their votes as the Bill swells from 9 pages to 400 to include
such
rort-protection measures as a 39 cent tax relief for toy wooden
arrows, millions more for Nascar race track owners, and millions
more for Alaskan fishermen who suffered from the Exxon Valdez disaster
almost 20 years ago, harbour deep suspicions that the words
“moral hazard” are spoken with a forked tongue.
This must be a particularly difficult
manoeuvre when the snout is buried so deeply in the feeding trough!
Moving to “socialism” in return for a 39 cent saving
on toy arrows from Oregon must have the likes of Hugo Chavez and
Fidel & Raul peeing their pants from laughing so much.
In fact, even the Mexicans are laughing:
The
Wall Street Financial Crisis
1929 vs 2008
Geopolitics & Economics
Of course, none of it is a laughing
matter for those awaiting retirement, or trying to continue operating
a business. Everyone is affected worldwide.
The seriousness of the global impact
emanating from a small area of Manhattan seems to have eluded the
illustrious Congressmen facing election in a few weeks.
Global credit markets have been frozen
for the past two weeks. Banks will not lend to each other –
and there’s little wonder in that with another one falling
over every day.
But the real point of this crisis
is that they will not lend to anyone else either, even to good and
solid companies and individuals. Some companies with a cyclical
cash flow, for example, rely on short-term credit during the down
months to help them pay bills and meet payroll. They can’t
get the money.
Many others, including mining companies
and manufacturers, have been forced to put expansion plans on hold
midstream because the cost of financing has gone through the roof
– if they can get it.
The crap has to be removed from the
banking system for two reasons – to ease the capital reserve
requirements and to make the banks feel more confident about lending,
not just to each other, but to solid customers who need extra capital
for legitimate
reasons and who are capable of not defaulting.
What the financial system needs is
time – and it may be several years. The point about CDO’s
is in the first word “collateralised”. While the paper
itself is currently next to worthless, it is actually backed by
real stuff in the real world. The paper may be
worthless because no-one can find a buyer, but the land and buildings
are not. True, they may be worth less than they were two years ago.
But the hope is – if the system
can be stabilised – that they will be worth much more in five
or ten years. Thus, the plan to get the crap off the books and into
an entity which can sit and wait for a full recovery, even if that
is a decade away.
The other interesting aspect is Warren
Buffett’s moves. In the past few months, the Oracle of Omaha
has been buying quite heavily into selected banks and railroads.
The central tenant of Buffett’s
philosophy is not to buy good businesses at great prices, but “to
buy great businesses at good prices”. The pattern of Buffett’s
buying seems to indicate a tendency to buy on the way down, rather
than waiting for the bottom and buying in during the bounceback
when there is stronger competition for the stocks available.
While the bailout package has now
passed, the volatility and uncertainty continue because everyone
is unsure of exactly how the measures will work – or, indeed,
whether they’ll work at all.
However, we are now getting very close
to the bottom of this Bear – but with the very real likelihood
of retests in early November and December.
Two scenarios now seem likely.
· We have
a brief bounceback early this week before the rapid downtrend
resumes and a solid Low is reached during the period from October
10th to 20th, probably around the Aries (Cardinal) Full Moon and
Mercury resuming Direct motion in the
middle of next week.
This would fit the time frame for
the final downleg in Bear campaigns, which I’ve explained
before tend to run 42 to 54 calendar days. The starting point of
the countdown would be the High price on September 2nd.
There is, also, a significant Fibonacci
turning point scheduled for early next week and, on top of that,
various cycle analysts have the second or third week of October
pencilled in as a likely bottom for the 6-year cycle.
· The second
most likely scenario is that markets turn around almost immediately
for a second degree countertrend (7 to 12 trading days).
This scenario would fit the more standard
pattern of Mercury Rx periods, where the price of the indices goes
back close to the starting point of the Retrograde period.
Astrologically
Of great significance here is the
Cardinal nature of the current Lunar pattern – with the start
at the Libran New Moon late last month followed by the Arien Full
Moon on October 14th.
Statistically, most Full Moons occur
very close to stock index Lows.
However, this pattern can invert and,
instead of being a Low, the Full Moon can coincide with a temporary
High.
Also of significance during the next
few days is a relatively high-energy astrological burst which is
drawing in Jupiter, Saturn and Uranus.
Let’s deal firstly with Venus,
the money planet. It starts the astrological action this week by
making a sextile to Jupiter, then one to Saturn, and closes out
the week with a trine to Uranus.
The principle of Jupiter/Saturn connections
relates largely to patience, perseverance and long-term strategic
planning. The appearance of Venus at the midpoint adds charge to
the Jupiter/Saturn Earth trine, which has still to make the last
of its three hits.
By closing out the week with a trine
to Uranus, this tends to suggest the possibility of a rally. Or,
in other words, the sextile from the Lesser Benefic (Venus) to the
Greater Benefic (Jupiter) brings an opportunity for acceptance of
the US bailout package as a
measure which could boost stock indices (the trine to Uranus).
We also have this week the Sun and
Mercury coming into conjunction as they both square Jupiter –
a second boost to expansive energy, even if Jupiter’s capacity
to generate good times is very severely hampered within Capricornian
constraints.
The following week brings the Full
Moon and the Mercury Direct station.
But, it is the Venus action this week
we need to monitor closely to try to get some sense of what will
happen late in October and into early November.
Because that is when this Jupiter/Saturn
midpoint is going to get a real hit … and it’s going
to happen just as Saturn is making the first of its exact oppositions
to Uranus, the negative energy of which has been unfolding all year
as it got fired into action by transits of the Sun, Mercury, Venus
and Mars.
We’ve been discussing this one
all year and the fast planet transits acting as a trigger show just
how deeply nasty this Saturn/Uranus energy is. I have a longtime
trading friend in Australia who has always avoided stocks undergoing
a Saturn/Uranus transit.
Her interpretation of the pattern
has always been a very blunt: “sudden death”.
Late in October, the action planet,
Mars, will conjunct the Jupiter/Saturn midpoint and repeat the Venusian
trine to Uranus.
The weekend after next, Venus will
move into Sagittarius, a sign with a distinctive capacity to exaggerate
the good times. Big moves occur in stock indices with planets in
Sagittarius, even the temporary passage of the Moon each month.
But there is potential danger looming
in early November when this “exaggerated” Venus suddenly
squares both Saturn and Uranus, just as Saturn’s opposition
is becoming exact for the first time.
And in early December that pattern
will be massively reignited when the Sun, Mercury and Mars all align
in Sagittarius to give the Saturn/Uranus opposition a massive charge
of energy.
By that stage, Venus will be out of
Sagittarius – but, by no means, “unexaggerated”
because it will be conjuncting Jupiter.
In short, even though various technical
indications such as Fibonacci time zones, cycle turn zones and the
historical evidence of Bear trend patterns all suggest we are now
very near a potential bottom-of-the-Bear, we know there are a couple
of very negative astrological periods coming in early November and
early December.
These tend to suggest the final downwave
is still developing, rather than being close to an end … or
that we will at least get two further retests of whatever bottom
develops in the coming weeks. Wall Street holds the key, of course,
and its reaction and (probably) over-reaction during the next two
weeks.
The point of going through the astrological
energy unfolding over the next two to three months is simply to
serve as a warning that any V-shaped looking bounce is ultimately
likely to become a W or, Heavens forbid, even a VW – a Beetle
recovery.
UNITED STATES
Philadelphia Banking Index Monthly[chart] click
to view this chart and download a printable PDF file.
Let’s start our technical review by examining the
US Banking Index, since it is the banks which caused the problem
and which need to be refloated higher before confidence can be returned,
not merely to stock markets but to the wider economic outlook.
[charts and comments follow...CLICK
HERE to view the charts and download the FULL printable version
of this report with all technical charts and further comments. (PDF
format)
The World At Large is delivered in advance to Astrological
Investing Premium Member subscribers. Randall Ashbourne
is a former journalist and political strategist residing in Australia.
*QHT Technical Charts created using Quick
Harmonic Trader Software, by P.A.S. Astro-Soft, Inc. makers
of Galactic Investor Astrology software.
***
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