The World at Large - January 12 - 13, 2008
by Randall Ashbourne

Geopolitics & Economics

Welcome to 2008, the year in which we should see a breakout to new Bull market highs.

It doesn’t feel like that at the moment. It feels like we’re in the middle of a crash … and it is entirely possible it’s more than a feeling; it’s reality.

There are signs, however, both technical and astrological, which indicate that no matter how deeply the current correction cuts, there is another leg to the Bull run not too far ahead of us.

While the price moves since Christmas, particularly in the American markets, have fears of an especially nasty Grizzly Bear running riot over the next few months, the world at large is, so far, unconvinced of the sharpness of its claws.

We will see this as we go through the technical charts of the various world indices later in this report.

I will discuss in more depth in the section on Astrology why the fears of a deep recession looming in the United States may be both exaggerated and unfounded.

Nevertheless, despite the astrological indicators of a smoother energy period in the months ahead and the bullish divergence of other world indices compared with the American markets, the immediate, short-term zone is one of high volatility and pessimistic prices.

There is a very strong chance, perhaps even a likelihood, that virtually all the world’s markets will plunge – and plunge deeply – over the next few weeks.

As we go through the charts, I will give you the likely stopping points for the downturn.

Against this scenario, we need to weigh the prospect that the market is finally making its four-year cycle bottom and that the uptrend which follows this correction will provide a very strong rally which carries all markets to record highs.

Before that can happen, however, the financial crisis caused by the bust of America’s hyper-inflated property boom and the subsequent devastation of banking reserves needs to be resolved.

Astrologically

Last weekend, Venus squared Saturn and this weekend it is squaring Uranus, effectively giving us early warning of what to expect late this year when Saturn and Uranus move into an exact opposition with each other.

Late this month, Mercury will turn Retrograde and Mars will move back into Direct motion, getting itself involved in a repeat of the energy patterns which have been unfolding over the past few weeks … changing signs from Cancer to Leo, opposing Pluto and Jupiter.

In short, we remain in a high-energy period for weeks yet.

However, on January 21 Jupiter in Capricorn will make the first of three Earth trines to Saturn in Virgo.

And that is the astrological reason the fears of a deep American recession are suspect.

Readers familiar with Kaye Shinker’s Textbook for Financial Astrology will know that the most common astrological markers for economic recession are Jupiter and Saturn in conjunction or opposition aspect.

These two aspects are a collision of the different energies; they produce an all-out battle between expansion (Jupiter) and restriction (Saturn).

The trine, however, is symbolic of a very easy and smooth flow of the two energies … ie: they are actively working together productively; not clashing.

And this is reinforced by the fact both are in Earth signs, which are practical, pragmatic, solid, stable.

Co-operating with each other in Earth signs, the symbolism from the aspect now unfolding between these two key markers of business activity is one of steady, reliable, stable growth.

In short, the high octane action which had been occurring while Jupiter was romping it up in his home sign of Sagittarius is getting pulled back down to earth. But, it’s not negative!

That’s a very important point. It does not symbolise a sudden slump from Boom to Gloom&Doom … it speaks, instead, of getting off the exciting rollercoaster and onto a very boring, very strong, very reliable locomotive which moves relentlessly forward along a well-defined set of tracks.

Jupiter exaggerates. In Sagittarius, he’s the endless optimist. Capricorn is the pessimist.
So, Jupiter leaves his home sign … and the mood suddenly shifts from exaggerated optimism to exaggerated pessimism.

And that’s why some markets are now unduly pessimistic; they’re still playing Jupiter over-the-top. The meeting of the two planets via trine on June 21 should rein this in … and the highly-productive co-operation of the two working together pragmatically should begin to show its potential for long-term, sustainable, steady growth.

General Overview

Unlike New York, the Australian stock market did not have any Up days last week. Yet, as most stocks got hammered, I watched as two of the country’s biggest steelmakers slowly ground higher.

What’s wrong with this picture? Simply that there cannot be a sustained industrial slowdown if demand for steel is going up.

Kaye Shinker, in her research developed the Jupiter Square theory. This teaches that goods falling under the rulership of a sign currently being squared by Jupiter will be in high demand and short supply. Goods ruled by the sign Jupiter is currently transiting will be in abundance and prices will fall.

As an example, oil comes under the rulership of Pisces and, from Sagittarius, Jupiter squared Pisces, telling us oil would be in high demand and short supply.

Now, from Capricorn, Jupiter squares Aries and Libra. Aries rules raw resources like iron ore and steel. These will be in high demand and short supply. No industrial slowdown – because the square from transiting Jupiter tells us the commodity boom will continue and that the demand for heavy machinery will be up.

Kaye’s article, “Jupiter’s transit of Capricorn”, is posted on the astrologicalinvesting.com web site. In it, she speculates on what an abundance of government might mean – since that is part of the symbolism of Jupiter in Capricorn.

Already we are getting a taste of what that means as the US Senate launches an investigation into sovereign wealth funds, which American banks have been going to, begging to be bailed out.

We may also see a return of the old laws which were designed to make banks act like banks and prevent them from getting involved in risky business which put depositors’ funds in jeopardy. The old laws were overturned to help Citibank diversify.

Jupiter in Capricorn also means an abundance of government wealth – and we can see that Abu Dhabi and Singapore have already bought huge chunks of major American banks. We will see more as these sovereign wealth funds, and those belonging to Beijing, begin converting their huge piles of American dollars into ownership of American companies – and real estate.

It’s no wonder the US Senate has suddenly gone on red alert. It made a huge mistake overturning the old laws which stopped the banks from acting like cowboys and now faces the prospect of having to explain how foreigners have swapped paper debt for half the land west of the Mississippi – or, at least, significant control over the companies which effectively own the land.

But, we also see some indications of bright spots. India, which relies heavily on income generated as the world’s IT backroom, rose to new highs last week, telling us that there is validity behind the recent strength in the Nasdaq and that, behind the scenes, business demand for technology is stronger than we might suspect from all the bad news that’s about.

United States

DJIA*QHT technical chart:

Prices have finally broken down through the bottom of the triangle and, technically, that is a very bad sign because it indicates we are already in a new Bear and the index can easily fall into a crash from this point.

In the reports last year, I warned we had received a Dow Theory Bear signal for the first time since 1999 and also discussed the appearance of a series of Hindenburg Omens last October. Since then, we have had recent confirmation of the Dow Theory Bear signal and the shelf-life of the Hindenburgs is four months, which means they are still in effect.

So, we are on the verge of a very nasty crash. Or, we are in the middle of a particularly vicious bear trap. There are some signs it could be a trap – and we’ll look at those in the coming charts. However, for the first time in this whole Bull run from the early 2000s, the MACD histograms on the monthly charts have turned negative – and that is very bearish.

GSPC*QHT technical chart:

The S&P 500 shows the same triangle formation as the DJI, but we’re now looking at the weekly chart to get an idea of how bad a crash might be.

Since August, when the subprime mess first caused a plunge, there has been a relentless stream of even worse news. On top of the financial mess, oil has soared again, along with gold.

Which is why I mentioned the possibility of a bear trap. If retail sales have collapsed along with housing prices, the banks are broke, nobody can fill up their tank because oil is too expensive and they can’t repay their credit cards … then why is this market still holding the line?

Why has it not already crashed way below the August Low?

Have no doubt at all; we are actually at the tipping point … from here we bounce – or we crash.

The level of 1380 to 1400 is not only a technical Support/Resistance line, it is the level of three key Fibonacci lines … and it is intersected by the uptrend line from July, 2004.

Nasdaq*QHT technical chart:

The Nasdaq, as I’ve said before, is a leading index … it breaks higher and lower before the other indices. Last year’s late breakout to new highs was a positive sign – but, in the past few weeks, the Nasdaq fell out of bed dramatically.

However, notice the gap … and gaps get filled. Notice also the troughs on the CCI … they are showing signs of positive divergence from the price action. It’s not dramatic divergence, but it is divergence.

And if you go back to the indicator on the DJI and GSPC charts, you’ll notice the same thing. On the chart of the 500, the price action is much worse than August, but the red, 14 CCI is not as deep as August, while the faster, blue line has already curled up again.

We cannot rule out an imminent crash because all three indices have clearly broken down from their triangle patterns. But, so far, the Nasdaq hasn’t even spiked as low as August.

Europe

London*QHT technical chart:

And look at the FTSE, which often marches as if in lock-step with New York … it is still within the triangle pattern … and nowhere near as low as August.

This is part of a pattern we’ll see in the coming charts – the other major world indices are not wholeheartedly supportive of America’s apparent pessimism.

What we’re starting to see here is international bullish divergence, which can be just as important as other forms of technical divergence.

It used to be said that if Wall Street sneezes, the rest of the world catches a cold. Well, America has caught a cold and, this time, other markets have barely developed even a slight sniffle.

Germany *QHT technical chart:

Another sign of international divergence … Germany’s DAX didn’t even develop the triangle formation, constantly pushing at the same line of overhead resistance … while recording a series of higher Lows.

Germany is the world’s biggest export economy. It will be overtaken by China sometime this year. Unlike China, Germany is an exporter of high-end goods – not $50 microwaves.

Someone is buying all those BMWs and expensive kitchen appliances.

If a picture paints a thousand words, this chart is the Mona Lisa in the fundamental transformation taking place in the geopolitical/geoeconomic landscape.

France *QHT technical chart:

Paris has fallen out of its triangle and, overall, has performed quite badly since following the rest of the world to new highs last July.

The performance is actually terrible, since every other major market at least managed to retest, if not actually briefly surpass, the July highs, following the plunge into August.

C’est la vie. At least they’ve had a few entertaining distractions. Serious Parisians are probably hoping, however, that President Sarkozy spends a little less time on l’amour this year and a lot more time at his desk.

Asia

India *QHT technical chart:

Now, after our brief flirtation with Paris, let’s get serious again.

India, the world’s backoffice for everything IT, continues to power ahead, breaking out firmly above the previous resistance level at 20,000.

It dropped out of the uptrend channel from mid-2007 very briefly to retest the support level at 19,000 and wasted no time in bouncing strongly upwards.

Last week, Tata announced plans to sell the world’s cheapest car, which will have a ready market not just in its home country, but throughout Asia and Africa.

India is diversifying. The foreign inflows from IT operations have created a middle class which can now afford to spend money on bigger and better consumer goods. And that, in turn, will have expanding flow-on effects as the people employed to make those goods, such as the Tata Nano workers, receive a lift in income to buy even more goods.

The technical indicators are showing a correction is coming – which could be part of America’s potential for a new Bear market, but the long-term outlook for India – and, therefore the whole commodity boom – is one of exponentially increasing growth.

China – Mainland *QHT technical chart:

Shanghai is contained within a triangle and is currently testing the resistance level again.

Like India, it is virtually a stratosphere higher than the August lows.

The CCI indicators are looking very toppy, even if the MACD line is not. We would expect Shanghai to correct from about this level and perhaps retest the rising bottom of the triangle.

If it can hold within the triangle over the next few weeks, it would indicate another upward test of the containing line and a potential breakout for a new rally run.

Hong Kong*QHT technical chart:


Hong Kong is flirting with a breakdown and we are receiving no clear signal from the indicators about which way it’s likely to go.

Like the American markets, Hong Kong is at a tipping point.

Nevertheless, it is also a stratosphere higher than last year and could actually take a dive all the way back to around the 24,000 level without doing any major damage to its longer-term trend lines.

It is the expatriate Chinese wealth in Hong Kong and Singapore which has bankrolled the massive industrial expansion across the southern mainland – which has, in turn, allowed the central government in Beijing to build up massive reserves of greenbacks.

Hong Kong and Singapore will be watching Beijing’s sovereign wealth fund investments very closely, hoping they’re not too slow to swap debt for equity stakes to prop up the American economy … meaning the Chinese will profit not just from producing the goods being sold in Wal Marts, but will also be getting a slice of the retail dollars handed over at the checkouts.

Japan*QHT technical chart:

The onetime industrial powerhouse of the 20th Century continues its dismal performance.

The Japanese share market is going from bad to worse.

However, positive divergence has been slowly building within the technical indicators, even as prices have continued to fall.

The downturn in Japanese markets is beginning to look a little overdone.

As an economy, Japan has yet to come to terms with lacklustre internal growth while Korea, China and India have stolen its former role as a major exporter of a wide range of consumer goods.

It is not very long ago that a Japanese market in this condition would have had the rest of the world in a severe recession. Now, it’s almost irrelevant.

Australia*QHT technical chart:

The ASX 200 has had its optimism post-August severely curtailed by the financial crisis emanating from Wall Street.

Again, we see an index which has broken down from the developing triangle … and an index which could well be in the middle of a crash.

Yet, we also see that, unlike Wall Street, the 200 is still holding well above the August lows.

This market is uncertain. It spent all of last week declining – ignoring the two-day bounce on Wall Street – preparing for the possibility of an imminent crash in New York.

But, the CCI and MACD histograms are unsure. So far, neither has gone as low as they did during the abrupt decline in December, although the MACD signal line certainly has room to go lower.

The weekly chart, below, shows a similar picture.

ASX - weekly*QHT technical chart:

The long-term trendline puts the ASX 200’s position in perspective … it is considerably ahead of the position of the S&P 500, which is now at the level of its bottom trend line from 2004 (the chart I showed back on Page 5).

The indicators are not at all optimistic, especially if we consider the position of the fast, blue MACD signal line, compared with its position at the August low.

The monthly chart of the ASX 200 is not optimistic, either. The MACD signal line has curled over and the histograms have gone negative for the first time since this huge Bull rally started.

The fear of a Bearish crash is real … and it is certainly not ruled out by the technical indicators.

However, this weekly chart also shows two important, long-term support lines which could stop a freefall and still keep the Australian share market intact for another leg of the long-term rally … especially if the Jupiter-Saturn earth trine restores stability to world finance markets and the normal Jupiter Square symbolism accurately forecasts another strengthening demand for raw resources. And it’s difficult to see how Tata will build its Nano cars without at least some steel!

Download a printable Adobe PDF version of this article.

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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