Review and Preview: This is our final issue of 2009, and what a year it has been. It began with the world in the midst of its greatest banking crisis since the Great Depression of 1929-1938. It ended with record profits for the banking and financial sectors of the economy and record bonuses for executives of firms in these fields. Stock and commodity markets boomed after their bottoms of late 2008 through early 2009. When the year began, it seemed that everyone was negative on the economy and stock markets. By the end of the year, it seems everyone is optimistic and a raging bull about both. Last year began with Saturn in opposition to Uranus, a 45-year planetary cycle that has a consistent history of corresponding to economic, political, and financial crisis. But along the way, the 14-year Jupiter-Neptune conjunction cycle unfolded from May 27-December 21, 2009. This is a geocosmic signature indicative of hope and optimism about the future. Sure enough, first the stock market and then the economy started a recovery that has lasted right into last week's final passage of Jupiter and Neptune. But as the year comes to an end, there are concerns about the sustainability of this recovery. Saturn has begun its first of three waning square aspects to Pluto on November 15, 2009, and it will last until August 21, 2010. This is the signature corresponding with increased debt and the realistic possibility of higher taxes, two historical killers of economic growth, particularly when implemented in the waning phase of the Saturn-Pluto cycle (2001-2020).
It is possible to break the Saturn-Pluto waning phase cycle of greater debt, higher taxes, and more numerous and longer-lasting economic recessions. Saturn rules losses, and Virgo rules work. Saturn was in Virgo September 2007 through October 2009, and almost like a clock, unemployment started to rise as more and more businesses ceased hiring. By October 2009, unemployment in the USA was above 10%, its highest level in over two decades. Business bankruptcies were at an all-time high, as were foreclosures on homes. But then Saturn moved into Libra, and the employment situation started to look more positive by late November 2009. Saturn will return briefly to Virgo in 2010, April 7-July 21, but the worst is probably over for awhile in regards to the jobs sector of the economy. The natural and geocosmic cycles both point to an upward swing now in the labor market.
The only thing that can interrupt this upward swing in the economy and jobs market is … intervening government policy and continuing unaffordable government spending, which simply increases its debt. For example, Congress and White House have announced their number one priority right now is not to reduce the Federal deficit, but rather to create new jobs. Instead of paying back the federal debt with $341B of unused TARP (Tax Asset Relief Program) monies as originally announced, they decided to use these monies to fund a new government sponsored job-creation effort. The banks who took the TARP money are also now paying back, but instead of using the repaid monies to pay down the debt as promised when the money was lent, these same bodies have decided to create another stimulus package for the purpose of creating new jobs. This is unnecessary and will likely result in greater debt. It is unnecessary because the natural cycle will result in more jobs now, with more employees paying more taxes to assist the federal coffers. Creating another government program will only take money away from the Treasury and it will not result in more sustainable jobs in the small business sector, where most jobs are usually created. Perhaps the White House and Congress know that the natural business cycle is improving and will result in more jobs, and this questionable new program will serve their political purposes. They can claim the improvement is because of their decisions, when in truth the "improvement" would be even greater if the government did nothing in regards to new spending programs and new taxes. But with Saturn in square to Pluto, and Pluto (over-involvement and coercion) in Capricorn (government), Congress and the White House are not likely to do nothing. They are more likely to initiate polices and new programs and even new taxes that will expand the federal debt and thwart the extent of the recovery now underway. If they are serious about wanting to create new jobs, they need only to put a freeze on new spending and new taxes on small businesses. They don't have to lower or raise taxes, because revenues for taxes will naturally increase under the business cycle now starting to turn up. The o ne thing small businesses want to hear before they hire new people is the government's assurance that there will be no new taxes. That would do the trick that would encourage them to hire new employees, or even raise wages of current employees. Small business owners could then plan, which is something they cannot do right now because they don't know what the tax situation will be in the next year. So they are paralyzed, and in turn, the economy will be stifled after a brief recovery - unless this situation of uncertainty and possible increase in taxes can be corrected. If business owners know they will not be punished with higher taxes from hiring more people, then they will hire. The increased tax revenues from a larger working force in the private sector can then be used to pay down the debt, and not create more costly programs that only increase the deficit and thwart a sustainable economic recovery during the waning phase of the Saturn-Pluto cycle. But would governments do this? Or will they continue the historical policies of this cycle phase that always represses economic growth? There is a choice, and the choice that is made will determine whether this becomes a longer-term bull market and economic recovery, or one that will fizzle and turn right back down again within the next 6-15 months..
Critical Reversal Dates: Look for cycle turns in many markets within three trading days of the forthcoming critical reversal dates:
January 14*
January 26-27***
U.S. Stock Indices Continue to Make New Highs, But …: December 28 will begin the 8th week of the third 13-21 week primary cycle within the greater 50-week cycle. It is therefore the last primary cycle within the greater 50-week cycle that began with the historic 4- and 6-year cycle low of 6470 on March 6, 2009. Since this 50-week cycle has been bullish, we know that the decline in this last primary cycle will be the steepest of the entire cycle. The challenge will be to ascertain when the crest of this cycle will occur. For once the top is in, that sharp 3-12 week decline will commence. If this decline is typical of 50-week cycles, it could be a loss of 1500-2500 points in the DJIA. However, since it is only the first 50-week cycle of the longer-term 4-year cycle, it may not be down that hard.
At the moment, however, the DJIA and nearby S&P futures are at their highest level of the year. The DJIA closed at 10,522 and March S&P at 1122, up sharply from their lows of early March at 6470 and 665.70 respectively. We are at the end of a time band containing 11 powerful geocosmic signatures, lasting December 10 through December 29. In addition, both the Sun and Venus are passing out of the optimistic sign of Sagittarius, and into the more sobering and realistic sign of Capricorn by December 25. The top could be forming right now. Or, it could extend into January, for there are positive Jupiter transits to the NYSE chart through January 8, and the next critical reversal date occurs on January 14, ±3 trading days. This later reversal date contains a Saturn station (retrograde), a signal that trader Lindsay Holt has previously identified as a correlation to crests in the U.S. stock market, ± a week or so.
Cycles-wise, this primary cycle could become a classical "three-phase" or "combination" pattern (see "Merriman on Market Cycles: The Basics" for explanation). If it is to be a classical three-phase pattern, consisting of three 5-7 week major cycles, then December 28 begins the second week of the second major cycle. The MCP (Mid-Cycle Pause) price objective for the crest of this major cycle would be 11,101 ± 191 in the DJIA and 1176.60 ± 17.75 in the March S&P contract. But if it is to be a combination pattern, then we would see a sharp decline into an 8-11 week half-primary cycle trough. A break below the 4-point primary trendline would probably suggest that this later pattern is happening. In the DJIA, that important upward trendline begins this week about 10,372, and is rising almost 19 points/day. As stated in our last issue, "Yet the market cannot be considered bearish until it breaks below a three-point upward trendline connecting the last three primary cycle troughs of March 6, July 8, and November 2. In the study of technical analysis, three-point upward trend lines represent very powerful support. When they break, they are usually followed by a very sharp decline. When at least two of those points represent a similar cycle type, then it means the crest of the next highest cycle is probably in. In this case, a break of a trendline connecting three primary cycle lows means that the crest of the next strongest cycle - the 50-week cycle - has probably been completed. Prices would then be in a decline for several weeks to the 50-week cycle trough." That trendline was touched again on December 18, and once again it held and led to another rally to new yearly highs. Thus the market is still bullish until it breaks. If last week was the crest of the first half-primary cycle, then it will break soon and we can look for a sharp pullback to 9805-10,143. But more importantly, that may signal the crest of the 50-week cycle is also completed. Even after the half-primary cycle bottoms, the next rally may fail to make a new high, followed by the final plunge to the 50-week cycle trough, due at the end of this primary cycle (i.e. in about 5-18 weeks). If this is to happen, then my best guess is that the 50-week cycle would form within ten trading days of Mars turning direct, which happens on March 10.
Given these thoughts, traders are advised to watch for signs of a primary cycle crest that could unfold anytime by January 15. Remember that in bull markets, prices go up in steps, but they come down in elevators. That is why we want to be prepared to take a short position in this market on this crest, one of the few times we recommend going against the trend. Once the 50-week cycle trough is completed, we will recommend going long again, for I think the next 50-week cycle will produce a bubble in equities - and many other financial assets (see Forecast 2010 Book for details).
Short-Term Reversal Dates in U.S. Stocks: Look for 2.5% or greater reversals in U.S. stock indices to unfold on these lunar reversal dates, or at most, one trading day before or after.
December 24*
January 4-5**
January 8*
January 19-20*
January 27-28*
Gold and Silver Fall Hard: On December 3, Gold made a new all-time high at 1227.50. Thirteen trading days later, on December 22, it had fallen to 1075, a loss of over $150/ounce. It is important to note that December 22 was in the 8th week of the primary cycle, when an 8-10 week half-primary cycle trough time band was in effect. Half-primary cycles are lows that end very sharp but brief declines. It was also just one day removed from the three-tsar critical reversal date of December 21, which contained the Mars retrograde of December 20. As stated last issue, "Keep in mind that on December 20, 2009, Mars will turn retrograde, lasting into March 10, 2010. Oftentimes lows or highs form within ten trading days of each date, and those lows or highs can last for several months." For now, we will treat this as a half-primary cycle trough. Whether it lasts for several weeks and even months depends on what happens in the next couple of weeks. Right now the 15-day slow stochastics are turning up from a bullish double looping formation below 20% (see daily chart). This is a very positive sign, once the stochastics rise above 25% and if K is widening its distance above D. That could support a very powerful rally to new highs by March 10, with a price target as high as 1274.70 ± 30.00. It could soar even higher if another unexpected event occurs, like a bank or nation default. However, Mercury is now retrograde through January 15, and that can coincide with false buy and sell signals by technical analysis. This rally must first close above the 25-day moving average to even confirm December 22 was a half-primary cycle trough. That MA starts this week at 1146. Assuming it can do that, the next challenge is to exceed a corrective retracement of 38-62% of the move down. This would give an upside resistance range of 1151.40 ± 18.00. Failure to do this would set Gold up for yet another decline - instead of a rally - into the primary cycle trough, which could manifest within ten trading days of Mars turning direct (March 10). The downside price target could be as low as 997.50 ± 27. I don't expect prices to fall below 950-980, so if this is the pattern that forms, all traders and investors would be advised to buy with a stop-loss under 950. For now, all, traders may also be long with a stop-loss under last week's low of 1075. However, caution is warranted as prices approach the 1150 resistance area. If Gold struggles there, you may want to capture some profits. If it can break well above there, then Gold is off and running again, perhaps into March 10, or perhaps even in to the middle of the year.
March Silver also soared to a new cycle high of 1950 on December 3, and then sold off to 1678 on December 22. That was both a three-star geocosmic critical reversal period (Dec 21 ± 3 trading days) and a powerful lunar reversal period (Dec 22-24) as given last issue. As with Gold, the low of last week was probably a half-primary cycle trough. It was still above the 1615 low that began the primary cycle back on October 18, so we can't say that this market is bearish yet. If this rally to the crest of the second half-primary cycle does not exceed 1950, then we have the first real sign of a possible trend change. The first challenge will be to close above the 22-day moving average, which would confirm the decline to the half-primary cycle trough is over. That MA starts this week at 1797. Then it must exceed the normal correction retracement of the move down, which would be 1814 ± 33. If this happens, then we can project an MCP price target of 2012 ± 47, or even much higher, into the Mars direct period of March 10 ± 2 weeks. Otherwise, failure to exceed 1850 sets up a bearish pattern in which Silver could fall back to 1542 ± 50 as the primary cycle trough forms, possibly around that same March 10 period. Right now I like the fact that Silver made a new low under a rising 18-day standard CCI indicator. Back on December 10, the CCI went to -200 which is a buy signal for us within the next 7 trading days. However, if prices make a new low after 7 trading days with a rising CCI, that is a buy signal too, and that is what happened on December 22. As stated last issue, "As with Gold, the December 18-21 critical reversal date, ± 3 trading days, is extremely important. A decline into there could be a buying opportunity, especially if that low is above 1700." Not bad. It traded down to 1678 intraday, but closed back above 1700. Traders may now be long, looking for rally back to the 1780-1850 area in the next 1-3 weeks, and maybe much more. If price fall below 1678, or fail to close above 1850 on this rally, prepare to exit for another decline. If prices should fall back to 1500-1600 around March 10, prepare to buy again.
Short-Term Reversal Dates in Silver: Look for 2.5% or greater reversals in COMEX Silver to unfold on these lunar reversal dates, or at most, one trading day before or after.
December 22-24**
December 31**
January 18-20***
T-Notes and Currencies: This starts the 9th week of the 16-20 week primary cycle in March T-Notes. Currently T-Notes are falling into their 8-10 week half-primary cycle trough. The primary cycle started at 115/16, and by last week they were back down to 115/21. If they take out 115/16, then the primary cycle will be bearish. The high will be in as November 27 when they reached 120/15. And following a 1-2 week rally to the crest of the second half-primary cycle, T-notes would then fall to its lowest price of this primary cycle. But if 115/16 holds in the next two weeks, it is possible for a rally back to 120 or higher. My bias is that the high is in. As stated last issue, "If it starts to close below 119, then look for December 18-21 to be a major or half-primary cycle trough, and trade accordingly. Longer-term, I think the 25-month cycle could top out in this primary cycle. But it is a little early to make the call that it is forming in the first major cycle phase." There is a concern that December 18 may have been the crest of the second major cycle. If so, this starts the second week of that second major cycle. But I am more inclined to think that T-Notes are falling straight into an 8-10 week half-primary cycle trough as Venus now approaches its conjunction to Pluto and square to Saturn, Dec 28-29, ± 3 trading days. If correct, I would look for a rally into the middle of this Mercury retrograde period (about January 5-8), or near its end (January 15) and back to the 25-day moving average, which is currently at 118/02 and falling. Traders would be advised to sell that rally. The bigger concern right now is that Saturn in waning square to Pluto, and both forming a difficult T-square to the Sun-Pluto opposition in the Federal Reserve Board chart. Despite his insistence that the Fed funds rate will remain at 0-.25% for the indefinite future, Bernanke may find that the market place is not so interested in purchasing anymore of the Treasury's debt at these low rates, especially given the inclination of Congress to continue spending and increasing the Federal deficit. With Saturn itself ruling restrictive monetary policies, and aspecting the FRB Sun-Pluto opposition, the symbolism would be for higher rates in the coming months. Traders are thus advised to sell the next rally to the crest of the second half of this primary cycle, particularly if T-Notes first drop below 115/16. On a move above 118/16, this bearish strategy will need to be reassessed. Pay close attention to the week beginning January 18, when Jupiter moves in to Pisces. There may be a positive announcement by the FRB at that time which could prove bullish for Treasuries, but it may be short-lived. If Treasuries are making a low then, aggressive traders could look for a short-term buy signal. If making a high then, it may be time to sell short. Let the market tell you when we get there.
Currencies are in a similar position as precious metals, although maybe not as potentially strong. From a yearly high of 1.5144 on November 25, and re-test at 1.5141 on December 3, the Euro has fallen to a low of 1.4216 on December 22. The Swiss Franc fell from 1.0091 to .9525 during the same period. However, the Swiss Franc was slightly lower at .9522 on December 17, thus producing a case of bullish intermarket divergence to the Euro last week. The 15-day slow stochastics on each has started to turn up, but so far not above 25% which would suggest December 17 and 22 as a primary cycle trough. Until then, there remains the chance of yet another decline to lower lows before a more impressive rally follows. If it turns out last week was the low, then look for both currencies to rally back above the 25-day moving average, which starts this week at 1.4709 and .9780 respectively in the cash Euro and March Swiss Franc. My bias is that the low formed last week, but the trend has now turned down. Thus a 2-8 week rally could be starting now, but I do not expect it to make new yearly highs. Once the rally is completed, look for a further decline to the 4.5-year cycle troughs in each, to be completed by June. For now, aggressive traders would be advised to buy this cycle low, which may have happened last week or could still happen this week. Then all traders would be advised to look to sell a 3-6 week corrective rally. In the Euro, do not expect this rally to exceed 1.5050, and in the Swiss Franc, not above 1.0000. If both do make new highs, then the possibility is created that the Euro may surpass 2.000 by next summer. What I would like to see is for the Euro currency to fall well below 1.4000 before May, ideally into the 120's or even 1.1200 area, to complete the 4.5-year cycle trough. And then start a move up to 2.0000 in 2011. It is only from a cycle's view that I want to see this, not from a patriotic one, where I don 't want to see this happen at all.
Grains: This starts the 16th week of the 15-21 week primary cycle in March Corn, unless it contracted to form at 379 on December 9, the 13th week. Our price target for the primary cycle trough was (is) 372 ± 14. A close above 414 would suggest that is the case. If so, prices could be rising to 488-1/2 ± 21. Until prices close above 414, traders are advised to wait for a decline back to 379 or lower in the next 5 weeks, and then look to buy. But perhaps go out into next September. Why? Because I think there could be a drought in July-August (maybe as early as May), and grain prices will soar. On a move below 340, we will have to reassess our bullish outlook. March Soybeans are now starting the 12th week of their 15-21 week primary cycle. Last week they may have fallen to an 11-week half-primary cycle trough as they touch the 992 area. A close above the 25-day moving average will confirm this. That average starts this week at 1049. If instead prices fall below 992, it means they are declining right into the 15-21 week primary cycle trough. But for now I like this market, and traders are advised to be long or get long with a stop-loss under 990. If correct, and prices can exceed the 1084 crest of the first half-primary cycle, then the upside price target for the primary crest becomes 1188 ± 36. If the rally does not exceed 1084, then a sharp 2-5 week decline will follow into the primary cycle trough that will see prices back below 1000. Like Corn, however, we want to be long going into the growing season because geocosmics indicate the possibility of a very hot and dry summer, much like 1988. December 28 begins the 13th week of the 15-21 week primary cycle in March Wheat. As stated last issue, "Here too it looks like a "combination" pattern of three major cycles (5-7 weeks each) and two half-primary cycles (7-11 weeks each) could be unfolding. If so, the 605 high of November 18 was a half-primary cycle crest, and prices are now falling into the half-primary cycle trough, due no later than December 18, at 481-540." The low so far has been 514 on December 17. If it holds, Wheat could rally back above 600. If it breaks, then prices might be falling right into the 15-21 week primary cycle trough. Right now, however, the daily stochastics are exhibiting bullish oscillator divergence. As the low of December 17 formed, stochastics were at a higher level than at a low a week earlier. But they need to get above 25% to strongly support the idea that the second half the primary cycle is underway, which would be bullish. Traders may look to buy here too as long as prices do not close under 514, and especially not below 480. Keep in mind with all grains, and especially Soybeans, that Venus is forming a square aspect to Saturn on Tuesday. And markets making a low then - or a re-test of a recent low - become a candidate to buy.
Crude Oil In Time Band For Primary Cycle Trough: On December 14, June Crude Oil fell to 75.00. It was the 22nd week of the 15-23 week primary cycle. On Thursday, December 24, Crude was back up to 80.45. As stated last issue, "The price objective (for the primary bottom) in a bullish market would have been 75.25 ± 2.27, so that low (Nov 27) was a little shy of a normal primary cycle decline. Furthermore, the daily stochastics never got really oversold, so there is a possibility it is still forming." It is in now, and this starts the 2nd week of the new 15-23 week primary cycle. The concern here is the longer-term 4-year cycle. That triple bottom of 32.00-34.00 in the nearby contract back in December 2008-February 2009 was only halfway through the 4-year cycle. I think it was the half-cycle (2-year). If so, then the high of this second half cycle is either in at the 84.85 high of October 16, or it will form early in this new primary cycle. If this rally lasts more than 8 weeks and finds prices above 85.00, then we have to consider that those lows of a year earlier represented a contracted 4-year cycle - a very contracted cycle. It would probably mean it was a cycle longer than 4 years, which we don't know about yet for Crude Oil. For now, we will treat this as a normal 4-year cycle. That is, we will look for this market to top out by the 8th week, probably around 85.00 ± 2.00. If it exceeds that range, then the MCP price target for the crest would be up to 109.26 ± 6.93.
The next MMA Cycles Report will be issued January 27. |
