- Probable further decline this week before turning higher (Dow, Sensex)
- January rally may not exceed November highs
- Crude oil to remain weak
- Gold trending modestly lower this week
- Probable further decline this week before turning higher (Dow, Sensex)
- January rally may not exceed November highs
- Crude oil to remain weak
- Gold trending modestly lower this week
This week is shaping up as a transitional week as the uncertainty and bearishness of the Mercury-Rahu conjunction gradually gives way to the more positive sentiment contained in the Mercury-Jupiter conjunction. Monday may see some upward movement as Venus is in aspect with Rahu, but the midweek seems more bearish as Mercury, now retrograde, once again makes the same aspect with Saturn as it did on Wednesday, January 7 when the market dropped over 2%. The aspect is most exact on Wednesday January 14, although investors should be prepared for possible declines from Tuesday to Thursday. While the results needn’t be identical to last week’s aspect, it is clearly a negative influence that will weigh on the market. Friday may finally see the mood improve as Mercury approaches Jupiter more closely. Overall, I think there is more downside potential here, but it is unlikely to break below support of Dow 8400/SPX 870, particularly if Monday is positive.
The market is laying the ground work for what will likely be its last rally over Dow 9000/SPX 930 before heading lower in February and perhaps March. At this point, the rally looks like it will begin late week and continue through inauguration week. The biggest gains may occur in the days after Tuesday the 20th, and continue up until at least Friday the 23rd. It is difficult to say anything decisive about what levels the rally may reach. Depending on how low we go this week, I think anything over Dow 9000 is likely, with 9500 also very doable. The failure to reach previous November highs of 9600 would be a good technical reason for the market to sell off afterwards in the last week of January.
Trading Outlook: With an inauguration rally likely, investors may consider taking a small long position on any declines this week with the intention of covering the end of next week. A safer strategy might be to wait until the rally is underway and prepare to short it late next week (Jan 22-23) with the intention of covering in early to mid-Feburary.
Stocks in Mumbai tumbled 6% last week amidst the Satyam debacle and the general return to bearishness that infected global markets. The major indices fell back to their 50-day moving average as the Nifty closed at 2873 and the Sensex at 9406. While I was generally bearish in my outlook, I missed Wednesday as the key day for the decline. While the confusion and uncertainty of the Mercury-Rahu conjunction clearly was a factor in the sell off, the more immediate cause of Wednesday’s Satyam revelations was an aspect between Mercury (trading, communication) and Saturn (pessimism, loss). Friday’s decline reflected Saturn’s damaging influence of Venus, as well as Mercury’s closest approach to malefic Rahu. With the large decline last week, Indian markets have once again failed to reach the 3150 level, which is now becoming a fairly entrenched resistance level.
This week looks somewhat negative, albeit not without some up days. As Mercury turns retrograde on Saturday the 10th, it turns away from the difficult energy of Rahu and towards the more confident and optimistic energy of Jupiter. While this bodes well for a rally, it may take some time before the energies to be fully exchanged. Monday is a mix of influences as the positive influence of Venus in aspect to Rahu is muted by the Moon’s conjunction with Ketu. So it’s possible we could see an up day Monday, but Tuesday is also a plausible candidate for a gain. By midweek, Mercury again aspects Saturn and infuses the market will a bearish mood that will likely predominate until the end of the week. By Friday, Mars will be in exact aspect to the natal Ketu and natal Mars in the NSE chart and this opens the door for a possible decline. If we see one good up day this week (either Monday or Tuesday), then it’s possible that the Nifty may fall to 2750 and 8900 on the Sensex. I think there is some significant downside potential here, so I would be very cautious as it’s possible the market may fall further than those levels.
This week will therefore see more downside probing before the market can move higher, most likely next week. This rally should be fairly strong and may well take the Nifty back towards the elusive 3150 level. I don’t think there’s much chance that it could go higher and indeed, even to reach 3150 will be a tall order. With the high likely coming at the end of next week or the beginning of the week after (Jan 26), the outlook for the market looks increasingly bearish. Mercury ends its retrograde cycle on February 1 in close aspect with malefic Mars in the NSE chart and in aspect to Saturn. This is a very bearish indication that will likely manifest in a major sell off. The market seems destined to retest its October lows over the next few weeks.
Trading Outlook: Investors wishing to play the upcoming rally may consider taking long positions at midweek at the earliest to see how the Mercury-Saturn aspect plays out, and perhaps would better off waiting until Friday, just in case the Mars sell off comes off as expected. Next week’s rally will be a good shorting opportunity since there will be a substantial decline to follow.
The US dollar gained ground against most currencies last week, as the Euro lost 4 cents and closed below 1.35. This was in keeping with our forecast as Mars conjoined the Euro’s Sun and transiting Jupiter moved past it’s aspect to the ascendant. The Euro may recover somewhat on Monday but it looks quite shaky again this week, with more downside risk. Midweek looks most bullish for the dollar as transiting Venus conjoins the natal Moon in the US dollar chart. The Rupee fell back to 48.5 last week on renewed dollar strength as investors once again placed a premium on safety. This week may see more of the same, so the Rupee may fall to 49 before recovering late week or into next.
With the return to pessimism last week, crude oil plunged to $41 after a brief rise to $50 early on. This was in keeping with our bearish expectation given the current Ketu aspect to the natal Sun in the Futures chart. With a stationary Ketu, prices are unlikely to make much upward movement, although this week looks less bleak. Crude is still likely to fall further, however, with midweek looking the most negative as transiting Mars aspects the natal Mercury. It’s possible we could see crude at $35 before it heads above $40 once again next week. The medium term outlook remains quite negative so we can expect to see it fall below $30 by February.
With the rising US dollar, gold trimmed its recent gains and ended Friday at $855, down over 2% from last week. This downward movement was expected as transiting Mars conjoined the natal Sun in the Futures chart. Monday may see some gain as transiting Sun conjoins the Futures’ Venus and Friday also has the potential for bullishness as transiting Venus conjoins the natal Jupiter. In between, however, we may see some pullbacks, so gold may finish fairly close to its current levels, although I would adhere to a downside bias. After gold makes some kind of rally next week, we can expect it to fall in early February, perhaps below $820.