Week of July 15

Last week the U.S. stock indices dropped to yet another new cycle low, taking out the lows of the prior week that had ended on a very positive note with the 300+ up day in the Dow Jones Industrial Averages on Friday, July 3. Our column last week (and in prior weeks) alerted traders to the danger of this market as follows:

The market started up early last week as expected. But then the Venus-Uranus opposition, which coincides with sudden reversals, kicked in. By Wednesday, July 10, the DJIA had fallen to 8811.70, well below the 8897.50 low of July 3. The S&P and NASDAQ were even worse. They fell below the lows of September 21, 2001 first, and by the end of the week, had taken out the lows of the 4-year cycle trough recorded back in October 1998. Instead of being bullish as one might expect, the period between Mars conjunct Jupiter (July 3) and Sun conjunct Jupiter (coming up July 19) began turning into a stock market panic. By Friday, the DJIA had fallen slightly under 8600. By Thursday, the S&P nearby futures had fallen to 900.50, well below the 929 low of October 1998.

For students of cycle studies, the breakdown of the 4-year cycle trough of 1998 is not a good thing. It means that even longer-term cycles have now turned down. These would be the 18, 36, and 72-year cycles. Indeed, it now technically confirms that the best days of the U.S. stock market are well behind us, with the all-time highs being achieved in early 2000, and re-tested (in the DJIA) in May 2001, just before the first passage of the 32-37 year Saturn-Pluto opposition cycle.

We have discussed the Saturn-Pluto opposition at great length over the past year. It not only correlated with the principles inherent in terrorist activities and accounting fraud at the major corporate levels, but it also has an historical correlation to a shift from budget surplus to budget deficits in government spending. In the "Across the Nation" column of the Detroit Free Press (via Reuters News) on Saturday, July 13, is a small article titled "Deficit Projections Rise to $165 Billion." The first sentence of this short article states, "The White House projected Friday that the federal deficit will reach $165 billion for the fiscal year, a 56% percent increase over earlier projections. The change is blamed on a drop in tax receipts from capital gains because of falling stock prices." According to the history of the Saturn-Pluto cycle, this is just the beginning of what could turn out to become an out-of-control monetary situation by the end of the decade. Contrary to popular belief, the United States does have a precedent for defaulting on its debt. It happened in 1842 during the Saturn-Pluto waning square, eight years after a Saturn-Pluto opposition in 1834. In 1834-35, the U.S. enjoyed a budget surplus as the stock market kept achieving new all-time highs, and no one thought the good times would ever end. Speculative fever brought about through new and exciting opportunities provided by advancements in communications (via railroad building across the U.S.) was rampant. But as with all speculative bubbles, that one too was burst by a combination of fraud, financial scams and over commitment of funds into investments that showed no profit at the time, but only hope for such in the future.

The fact that the previous 4-year cycle low was broken in the S&P and NASDAQ means that the longer-term trends are now down—and will remain basically down—until they bottom. They are not due until the Saturn-Pluto cycle comes to either its waning square (end of this decade) or conjunction (middle of next decade). It requires a totally different investment approach, one designed to preserve capital more than seeking to appreciate capital through equity markets. This is the part of the Saturn-Pluto cycle where equity values do not tend to appreciate as much when inflation-adjusted figures are used, as do commodity-back investments. However, the exact time of the switchover is not precise, but only approximate. That is, during the phase from conjunction to opposition between Saturn-Pluto, equities are the place to be. They appreciate extremely well. But from the opposition to the conjunction, equities do not appreciate nearly as well, whereas some time during that same part of that geocosmic cycle, commodity prices do.

However, the market is not likely to be straight down until the opposition, or even the waning square between Saturn and Pluto. In fact, as bad as things have seemed in the past few months, the worst is still probably not due until some time to come (maybe another 1-3 years). In the meantime, the breakdown in U.S. stock prices last week means that the probability is quite high that the 50-week cycle trough is trying to form with this current primary cycle. The current primary is already entering its 23rd week in the DJIA, and 20th week in the S&P. The normal primary cycle periodicity is 13-21 weeks, so one can see that it has already expanded beyond this in the DJIA. When the primary cycle expands or contracts, it is known as a distortion. Distortions happen about 20% of the time—except when they coincide with longer-term cycles. When that happens, the probability of a distortion in the primary cycle jumps to 50%. We are in the time band for not only a 50-week cycle (with an orb of 38-62 weeks, as measured from last September 21), but also a 4-year cycle (due 16-25 months after the Presidential election, or March 2002-December 2003). In this respect, we should note that no primary cycle in the past 70 years has exceeded 29 weeks, and 92.75% of them unfold before the end of the 26th week. Therefore the probabilities are very high that this primary cycle will end sometime—anytime—in the next 3 weeks.

Still, sometime-anytime in the next 3 weeks can seem like an eternity when the floor is falling out. And that is precisely what seems to be happening now. The lunar cycle reversal period of last Thursday-Friday (July 11-12) offers some hope, as discussed last week, as follows: "On Thursday and Friday of this week (July 11-12), the Moon will enter Leo. This lunar cycle may be the key, for it is the most prominent correlate to short-term price swings of the three lunar cycles in effect this week. A high very early this week, followed by a corrective decline into Thursday-Friday that does not take out the lows of July 3, may present a very good buying opportunity." Well, we took out the lows of the prior week, which is not good. But still, the markets closed considerably off those lows, so there is a slight possibility that the Leo lunar cycle will correlate with the primary (and maybe longer-term) cycle lows. But if those lows of 8599 in DJIA and 900.50 in September S&P futures break, the next lunar reversal period is not due until the Full Moon phase of July 24-26. We could easily make a case that the sense of panic could continue, and even climax, then. If that happens, then all the stock markets of the world will likely follow suit. If instead last week's lows hold this week, then the possibility remains opens for a 10% or greater rally to commence. Such a rally is due sometime in this July 3-August 10 geocosmic time band of the Sun, Mars and Jupiter all in conjunction to one another. A good buying opportunity is coming up, if you consider a 10% rally in a matter of a few weeks good (as a trader, I do). But the question is: from what level? A break below 8599 in the DJIA points to the next major support level as 8100-8400. Below that, the panic is likely to intensify as investors flee in droves, like lemmings over a cliff, with no bottom in sight before the Full Moon.

Disclaimer: Past results are no guarantee of future results. Therefore no guarantees are made by either the author or publisher of this report. You are solely responsible for any action you initiate in the market, and the author and publisher assume none whatsoever. Information is provided with sincere intent, and according to our own proprietary studies and methodologies.

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