(13 April 2020) Financial markets remain in rebound mode this week as the number of coronavirus cases continue to fall amid emerging plans to end the lockdowns.  US stocks soared more than 10% last week as it seemed the virus was peaking and the Fed announced it would buy another $2 Trillion in private and public debt.  I have to admit I didn’t see such a huge rally happening last week although I did think some upside was very likely on the Mercury-Jupiter-Pluto alignment.

The Jupiter-Pluto conjunction has been an important bullish influence in the past few weeks since the March 23 low.  Both are slow moving planets and thus exerted a strong influence on sentiment following the waterfall decline in February and March.   Typically, ongoing positive sentiment can be further accentuated through the alignment of a third, faster-moving planet.  This is what took place last week as Mercury aligned with Jupiter and Pluto.

We will see another fast-moving planet align with Jupiter and Pluto this week as the Sun enters sidereal Aries and forms a 90-degree angle.  This is exact on Tuesday although it will remain within range until Wednesday.  That suggests we could see some upside into midweek following Monday’s modest sell-off.

But the next major alignment we should focus on is Saturn and Ketu (South Lunar Node).  Both are considered natural malefic planets and therefore are correlated with down markets.  As it happens, Saturn will form an exact 30-degree alignment with Ketu this Friday, April 17.  Due to Saturn’s four-month retrograde cycle in 2020, this 30-degree alignment will recur twice more, on July 16 and September 3.   I should note that while the dates of exact alignment are important, they need not exactly match days of maximum market impact due to the very slow velocity of both planets.  I would tend give an impact window of at least five days either way, maybe more.

The Saturn-Ketu alignment that is 30-degrees apart (sometimes written as “Saturn-30-Ketu”) has a difficult history.  The last time is occurred was 7 October 2018 at the beginning of a large sell-off when the Fed misread the market and started to reduce its balance sheet (QT) by removing liquidity from the financial system.  Between the beginning of October and Christmas Eve, US stocks dropped 20%.  The Saturn-30-Ketu alignment was a key part of that decline, although certainly not the only factor, as Uranus was also in fairly close alignment among other factors.

The next previous alignment occurred on 27 May 2018.  Interestingly, stocks didn’t do much of anything around that time and they basically moved sideways.  So it is important to remember that this alignment will not always coincide with declines.  But evidence suggests there is an elevated risk of declines nonetheless.

Previous to that, we have to go all the back to 2008 and the global financial crisis.  Saturn was 30 degrees away from Ketu on 12 October 2008, in the depths of the stock market sell-off as the real estate bubble finally burst.  This was a very bearish period and was intensified by the presence of other planets like Chiron and Neptune which were also in alignment with Saturn and Ketu.

Previous Saturn-30-Ketu alignments occurred in November 2006 and August 1997.   The November 2006 alignment actually coincided with a somewhat bullish period while the August 1997 alignment was bearish, although the decline was only about 7% during the two week period when Saturn was in closest alignment with Ketu.

So while this alignment isn’t always bearish, it tends to coincide with declines.  For this reason, we should pay careful attention to the market over the next two weeks or so as we could see some kind of sell-off.  Perhaps next week (April 20-24) is more vulnerable in that respect since the Sun could act as a trigger as it aligns with Saturn and Ketu.

The subsequent alignments in July and September suggest further downside is very possible, although it is open question if this will produce lower lows.  Even if we don’t see stocks break below their March 23 lows, the presence of these two additional Saturn-30-Ketu alignments in July and September suggest stocks are much less likely to enjoy a V-shaped recovery in 2020.

For more details, check out my weekly subscriber newsletter which is published every Saturday afternoon (EST).   I outline the key technical and planetary influences for US and Indian stocks for the short and medium term, as well as currencies, gold and oil.

Photo: C-Span