MMA weekly column

We continue to anticipate another severe decline based on PLEASE NOTE: There will be no market column issued next week. The following Monday will be the Labor Day holiday in the U.S. and markets will be closed on September 7.

Review and Preview

I made it to Germany today. It was an easy but long trip as direct routes are hard to come by now. As Jupiter (international travel) will depart from Capricorn (restrictions and travel bans) around the winter solstice, readers may want to look at airlines and travel-related companies for possible investments on any normal corrective decline. But as you see in this week’s column, “normal” corrective declines have been the exception rather than the rule in stocks this year.

Global stock markets were generally favorable last week, with many making new post-crash highs again. The NASDAQ and the S&P both made new all-time highs. The Dow Jones Industrial Average, German DAX, and India’s NIFTY indices are not far behind. Japan, however, had a setback as Prime Minister Abe announced his resignation due to health concerns on Friday, and the Nikkei tumbled.

In other markets, Crude Oil soared to a new post-crash high and Gold is once again testing 2000 as the U.D. Dollar is again testing its lowest level in over two years.

Short-term geocosmics

All financial and commodity markets are vulnerable to major reversals shortly as Mars will turn retrograde on September 9 and Jupiter will turn direct on September 12. Even before then, Venus (values, money) will be in opposition to Jupiter, Pluto, and Saturn August 25-September 2, and forming a T-square with Mars on September 4. These are geocosmic reversal signatures, and the entire time between now and mid-September can witness cyclical highs or lows from which reversals unfold. But after that, one of the most powerful geocosmic time bands of the year takes place, September 28-October 19, when Mars is retrograde in its ruling sign of Aries and makes a square to the Capricorn stellium of Saturn, Pluto, and Jupiter. This portends a major shift in world matters, whether in politics, the economy, or nature. And financial markets are likely to react to that shift by exhibiting major reversals of trends. How long and how steep these reversals last depend on many factors, as will be discussed in the longer-term outlook below.

For this week, there is a full Moon on September 2, the same day that Venus will be in opposition to Saturn. One of our basic geocosmic trading rules is that any market that is declining into a hard Venus/Saturn aspect is a candidate for a reversal and rally. Traders will want to identify those markets.

longer-term geocosmics and thoughts

Economists know that they are never wrong. However, economists’ forecasts of high frequency data releases have been less correct than they could be. Why is this? … This is not a conventional economic cycle. Peoples’ reaction functions are different to previous cycles. Economic models assume reaction functions are stable. Finally, the pandemic accelerated structural changes in the economy. Economic data is slow to recognize change. This makes it hard to fit macro and micro data together. – Paul Donovan, “Why Have Forecasts Become Less Correct?” UBS Weekly Blog, August 21, 2020.

We should talk about this. Not only are economic cycles distorted as of late, as one of my favorite economists, Dr. Donovan, observes in the above quote, but so are cycles in world stock and treasury markets. This distortion of cycles is not apparent in the cycles of precious metals, like Gold, or currencies, where cyclical patterns in both of these sectors have corresponded very well with cyclical and geocosmic studies this year.

But why has it been difficult to enact trades based on forecasting trading cycles in stock indices? It may be, as Dr. Donovan suggests in regard to economic cycles because the pandemic has “… accelerated structural changes in the economy. Economic data is slow to recognize change. This makes it hard to fit macro and micro data together.” This is certainly correct and does affect market behavior. But I would go further and say that the greater underlying cause to the 2020 distortions in stock and treasury market cycles is due to the massive monetary accommodation (liquidity) provided by the central banks of the world. In many cases, central banks have actually intervened and made large purchases of stocks and bonds, known as “quantitative easing.” This type of financial intervention and engineering greatly distorts the price of these securities and negates the concept of “free markets” upon which normal cyclical patterns unfold. This then is the basis for the saying, “Don’t fight the Fed.”

It’s not that the cycles in stocks and treasuries no longer take place, or that geocosmic market timing factors no longer work in these markets. They still do. Market tops and bottoms still unfold “on time.” However, the normal pattern of price activity – price objectives to trends and countertrends – is greatly distorted. Rallies are much stronger and longer than usual and corrective declines much less than usual. Or, in the case of treasuries, the amplitude of price activity has become extremely narrow. Cycles and their reversals are there, but normal 40-60% corrective price declines have become rare. Hence, it is difficult to buy a market bottom on a 40-60% correction in a time band when a cycle is due and geocosmics also indicate it is time to enter, but there is not decline of that amplitude to execute a trade at a favorable risk/reward ratio, which is critical to the trader. In these situations, it is better to just “buy and hold” and “not fight the Fed.”

However, this type of financial engineering also creates “asset bubbles” in which these same markets fall much harder than expected when an unexpected shock (a “Black Swan”) occurs, and especially if central banks have pulled back from satisfying the addiction of overspending and debt explosion caused by the fiscal mismanagement of world governments. Then, instead of the “less than usual” corrective declines, you get considerably “more than usual” dangerous declines.

We saw the same phenomenon occur in 2012-2015. Then too there were no “normal corrective declines.” The rallies went higher and lasted longer than normal. What do these periods of market pattern distortions in financials have in common from the geocosmic standpoint?

The 2012-2015 instance occurred under the long-term Uranus/Pluto waxing square. In the past, Uranus/Pluto hard aspects coincided with accelerating debt crises that led to stock market crashes. But that was before the Fed Chair Ben Bernanke initiated unorthodox policies known as ZIRP (Zero Interest Rate Policy) and QE (quantitative easing) to counter the liquidity crisis. It worked. Instead of falling during that period, world stock markets soared, as monetary liquidity and debt increased at a historic level. The result was an asset bubble as investors were virtually forced into equities unless they were willing to accept the lowest returns on their savings ever. When the drug (low-interest rates and QE) was taken back in late 2018, investors panicked. But then the Fed and central banks started a new round of ZIRP. When the pandemic was unleashed in February, the stock market hemorrhaged. QE came back, liquidity and debt increased sharply, and investors have once again returned to stocks. This took place as Saturn and then Jupiter conjoined Pluto, January-November 2020.

The purpose of this column, is to relate economic and financial market phenomena to geocosmic studies What is the common geocosmic denominator for these periods of market cycle distortions? Pluto. The god of the underworld planet is associated with both debt and intervention (“financial engineering”) to achieve a desire result. In a hard aspect to an outer planet it can – and has in the 21st century – coincided with 1) historic increases in world debt, 2) poor fiscal mismanagement requiring borrowing by world governments, and 3) efforts on the part of central banks to correct poor fiscal policies by intervening in financial markets and engineering the demand for stock and/or treasury assets.

The final Jupiter/Pluto conjunction for this cycle takes place on November 12, 2020. Chances are the government will continue to spend trillions of more dollars on stimulus programs, leading central banks to accommodate by increasing monetary liquidity, and giving rise to yet another asset bubble in stocks and perhaps treasuries. If they start to pull back on these expansive monetary behaviors as Pluto begins to leave its orb of influence to Jupiter – after the U.S. elections are over – what do you think will happen as the next major aspect that unfolds in 2021 is Saturn square Uranus in Taurus?

Hopefully, the above explains why it has been challenging to establish a favorable risk/reward position trade in the stock market since our sell signal February 12-20 at the high preceding the crash. It is not from lack of trying to buy corrective declines, but from lack of those corrections falling to “normal” price target levels when cycles are due. Yet it doesn’t alter our long term views that are based on the historical patterns in both geocosmic and cyclical studies.

these studies, but at the same time, we are swimming upstream against the Fed’s willingness to enable unchecked government fiscal policies that seemed doomed to create asset bubbles that will eventually result in another serious selloff just as soon as central banks try to restore to normalcy. With Saturn conjunct Pluto in 2020, the long-term cycle low in the interest cycle is due this year, as detailed in the Forecast 2020 Book. We will, of course, update that analysis in the Forecast 2021 Book, due out in three months.

In the meantime, I wouldn’t (and won’t) give up on the correlation of either cycle or geocosmic studies to any financial market. It is working very well in commodity and currency markets and it will return to equity markets too as soon as the Fed and other central banks relax their enabling policies supporting poor fiscal management. You know the saying about those who ignore history: they are doomed to repeat its mistakes and experience similar consequences. There is a time to appreciate your capital and a time to protect it. The former has been present since March 23, 2020. But the latter may not be that far away. Viewed from another angle, the time to purchase assets at low levels is not here yet, but it may be coming sooner than many think. Cash will again become king at some point. But in which currency or storage of value? We will discuss this further in the Forecast 2021 Book.