(25 December 2023) US stocks pushed higher for the eighth straight week as slowing PCE data provided more evidence for an imminent Fed pivot. The S&P 500 gained less than 1% on the week to 4754 while the Nasdaq-100 finished at record high weekly close at 16,777. This bullish outcome was not unexpected as the Mercury-Jupiter and Venus-Mars-Uranus alignments both hinted at further upside.
The disinflation story continues to gain traction here as most data is signaling slower growth amid reduced price pressures. And with inflation trending lower, the soft landing scenario remains the default assumption for the market as growth is still positive. The latest GDPNow reading from the Atlanta Fed is 2.3% which would be commensurate with current expectations for 2024 as the Covid-fueled inflation surge further recedes in the rear-view mirror. As a reflection of this sanguine view of inflation, bond yields continued their retreat last week as the 2-year fell to 4.31% and the benchmark 10-year fell to 3.90%. However, markets continue to have much lower inflation expectations than the Fed given the ongoing 75 basis point divergence between the market and the Fed funds forecast. While this divergence could ultimately resolve in either direction, it may be worth noting that the 10-year yield is sitting on potentially significant support at the 50 WMA. Since this line has acted as an interim low on several previous occasions, we should not be surprised if yields started to creep higher once again. Higher bond yields would likely force the market to recalibrate its expectations for a pivot in 2024. Unless higher rates were the result of stronger evidence of economic expansion, stocks would likely sell-off if rates made a significant move higher.
The planetary outlook looks increasingly bearish. The bullish Jupiter influence may be showing signs of ebbing as it approaches its direct station on December 30. The direct stations of Jupiter are not necessarily correlated with interim highs, although this one is more likely to do so given the angular separation alignment with Neptune and Chiron (=21 degrees). This alignment was actually exact a week ago but has remained within range due to the slowing speed of Jupiter. There is also a powerful Jupiter progressed alignment in the NYSE chart that is exact in late December which is another indicator that bulls may be out of favor quite soon…
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This week (Dec 25-29) leans bearish. While the week is seasonally bullish from the Santa Claus rally (approximately Dec 22 – Jan 4), there is some reason to think we could see some significant downside. After Monday’s holiday closing, Tuesday’s Sun-Jupiter alignment has a bullish bias. This alignment always occurs near the time of the Jupiter direct station and often marks the high water mark of optimism before Jupiter returns to normal forward motion. I would therefore not be surprised to see further upside on Tuesday. However, bears should be carefully monitoring the midweek alignment of Mercury, Mars and Neptune. Retrograde Mercury forms a bearish conjunction with Mars on Wednesday while also forming a bearish square alignment with Neptune at the same time. While the ongoing positive influence of Jupiter could mitigate some of the implied downside of this alignment, it seems unlikely to completely negate it…
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