Zbigniew Piekarski looks to the heavens for fiscal enlightenment
"In order to understand the stock market we have to realize that, like anything enormous and inert, it's fundamentally stable, and, like anything emotion-driven, it's volatile as hell. Got that? Me neither."
- P.J. O'Rourke
Markets are never logical. They are powered by emotions, by the hopes and aspirations of the participants, by extremes of greed and fear. Yet the market is an order-seeking mechanism and, as such, displays a beauty and majesty of form that, once recognized, awes, astounds and inspires. There is no logic, there is no rationale, there is only pattern, price and time.
The Standard & Poor's 500 is the most actively traded index, representing about 30 percent of the entire stock market capitalization. As such it is the barometer of the dreams and nightmares of traders around the world.
On Friday June 6, the S&P 500 registered a high of 1007.69 before closing down at 987.76. That Friday was the 239th day since the October 10 low of 768.63. The index had taken 239 days in order to gain 239 points.
It traveled in an upward correction to retrace 38.2 percent of the fall from 1552.87 to 768.63 on a semi-log scale and retraced 61.8 percent of the preceding wave-3 decline. (Both 38.2 percent and 61.8 percent are Fibonacci ratios). There is a beautiful symmetry in those numbers and ratios.
As the end of June is the cut off point for half-yearly reporting, another pattern has emerged - late buying in the afternoon driving the index upwards towards the close. These are the Institutional Investment Managers who missed the market rally and wish to show their clients that they held the best performing stocks. They list their holdings but not the prices at which they were acquired.
The Jabberwockies are amazed at the present resilience of the market, the fact that optimism is at a 16-year high, that bad news is ignored and that there is an absence of sellers. Once again, they show their ignorance of Nature's Laws. Let me introduce you to the two laws relating to cats.
You must have heard of the expression "Dead Cat Bounce." This applies to shares or markets that have fallen very sharply. The theory behind it is that if you throw a cat out of a window from a great enough height its body will bounce after it hits the floor. Therefore, if the price of a share falls steeply there will be a reflex spike upwards once it hits bottom, and you can make a little money at that time by going "long."
The next one is slightly more complex and you need to participate in the experiment. I call it the Clinging Pussy Syndrome. Find a cat and throw it at the trunk of a large tree. Watch how it clings onto the bark and slowly makes its way down before it jumps to the floor. Now pick it up, stroke it, have a conversation with it as though it understands what the hell you are talking about and then throw it high against a brick wall. Notice the difference?
The tree trunk represents the present and the days after June 25, when the Fed will cut rates again. The brick wall will be the weeks after the Fourth of July when the markets in the United States will start to fall, dragging all bourses with them. The European Pussies may hit the wall a bit earlier, as the land of the Yodelling CEO has admitted that it is in deep trouble. (I think this is in reference to Switzerland - editor.)
The heavens support my pessimistic assessment of our future. On Wednesday June 4, Saturn entered Cancer and will remain there until July 16, 2005. This does not bode well for the United States, which is associated with Cancer as it was founded on July 4, 1776, nor for President George W. Bush, whose birthday is on July 6.
Saturn in Cancer periods have been times of difficulty and strife. Saturn was in Cancer during the last days of World War I (from May 11, 1915 to June 24, 1917 - with the exception of a short six-week interlude in the fourth quarter of 1916); the end of World War II (June 20, 1944 to August 2, 1946); and the end of the Vietnam War and Watergate (August 1, 1973 to Sept 17, 1975).
As we are a part of the universe, we must accept that our lives are intimately interwoven with the heavens and that the sun and moon do exert an influence on our lives. For more than 100 years, peaks in the 10-11-year sunspot cycles have indicated long-term reversals in stock prices. The monthly count in sunspot activity accelerated well above 100 as the markets peaked and managed to stay above 100 through the first part of 2002. Seven months ago it dropped below 100 and has declined ever since. Should you wish to know more, read Did Sunspot Forces Cause the Great Depression by Sharon G. Harrison (Columbia University, New York) and Mark Weder (Humboldt University, Berlin), who analyzed the last time recession turned into depression and the savings of a generation were destroyed.
Pattern, price, time; extremes of optimism and bullishness that are the highest in 16 years; the constellations in the heavens and the activity of the sun all point to the acceleration of a bear market of historic proportions.
Another sure-fire bet is that George W. Bush will not only lose the election in 2004 but lose it by a landslide. It does not matter which Democrat runs for office. If my market outlook is correct then he, she or it will be the next president.
On the WSE: The lines of resistance are holding so the bear market rally appears to be over. I have been tracking the leading indicator of the most widespread and unrecognized economic sector in Warsaw. Listed on the Australian bourse, it opened at A$ 0.70 on May 3 and peaked at A$ 2.05 the day after, but now stands at A$ 0.97. The company is The Daily Planet, the first listed brothel in the world. Talk about premature ejaculation.
