February 2016 Stock Market Outlook

Monthly Trend is Bearish – Daily Trend is Bearish

Current Stock Market Outlook Allocation

Neutral and in Cash on the S&P-500 since January 15th near 1850, with Buy on a weekly close above 2000 and Sell on a weekly close below 1800.

Previously Bullish the S&P-500 since December 2012 near 1450.

A major high in stocks in 2015 is very likely

We have a number of cycles suggesting a major high in 2015, and Global Markets, Sectors and Indicators are turning back down without making a new high. This makes the 2134 high in the S&P-500 a likely multi-year high, especially with the third weekly close below 1900. A typical Bear Market lasts 12-24 months, and some important cycles point to May 2018 as a possible end to this one.

Retail Sales are warning like in early 2008

Retail Sales Year over Year are weaker than it appears on this chart, since January 2015 was very low and easy to beat. The Month over Month number was only 0.2% and remains weak like in early 2008. This could be dangerous and is a drag on future GDP, but we need to see a negative Retail Sales report to turn this bearish. With the Christmas shopping season now behind us, and the negative stock market in January and February, we are likely to see lower Retail Sales into April as seen in about half the years historically.

US Retail Sales

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Job growth is slowing since early 2015

The Jobs report was still positive, but well below the 200,000 average seen in 2014. In fact the last 6 months saw 3 numbers well below the average of 2014 and the poor earnings are not likely to cause a surge in hiring anytime soon. This suggests that Job growth will continue to slow in 2016, and any numbers close or below 100,000 is likely to pull the markets even lower.

US Non-Farm Payrolls

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GDP suggests a recession like 2001 and 2008

The first estimate for Q4 GDP came in at 0.7% dragged down mostly by imports. Services contribute 45% to the GDP number, and the ISM Non-Manufacturing index has been declining since October 2015 suggesting a further drag on GDP and negative revisions to the 0.7% number are likely. Annual GDP is now 1.8% and below the 2.0% level necessary to avoid a recession.

US GDP Rate of Change

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ISM Non-Mfg. is turning down like late 2000

The ISM Non-Manufacturing index represents 45% of GDP and is a good indicator of future GDP. It gave early warnings in 1998 and 2007, and more sudden collapses in late 2000 and now early 2015 suggesting a recession is upon us.

ISM Non-Manufacturing

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Sentiment is like 1973 (Bear) or 1983 (Bull)

The Michigan Sentiment Survey warned ahead of the 2008 crisis and is acting like 1973 which saw a large drop but also 1983 which began a rise into 1987. The jump in Sentiment would be bullish if it was matched by rising GDP and if it did not start to drop again like in 1973.

Historical Michigan Sentiment

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Venus Altitude predicted the July 2015 high

The Altitude of Venus is the largest component of the Bradley indicator, but the most accurate signals come from the Venus retrograde periods when the Speed of Venus goes to zero and reverses. Examples of this are the 77 month turns between the October 10, 2002 and March 9, 2009 lows and 77 months later is the current pair of dates on July 25th and September 8th, 2015 correctly predicted a significant high in July 2015.

Venus Altitude and Speed and Stock markets

Cumulative New Highs are in a Bear market

The Cumulative New Highs minus New Lows are the most reliable long term indicators. They have turned bearish with the move below 2000, and have since resumed their decline confirming a Bear Market is on the way. They also suggest another 10% decline in February that would take the S&P-500 below 1700.

US Stocks Cumulative New Highs

Historical Down Volume is in a Bear Market

The 200 day Nyse Down Volume is rising like in 2000 after being as overbought as the March 24, 2000 high. The current level suggests that we are only 25% of the way down and that another 30% decline into Fall 2017 is likely. The Nasdaq Up/Down Volume also crossed into Bear market territory and suggests another 10-15% down before we can get a larger 6 week rebound.

US Stocks Up and Down volume

A Kondratiev shift in Rates is coming

Kondratiev wrote about a cycle of growing debt and low rates in one generation causing rising rates and debt deflation for the next generation. The Rates cycle came close to a low in late 2012, but will most likely occur in late 2017 or even 2022. However, do not expect rates to rise quickly since the Central Bankers who fear Debt Deflation the most will do their best to keep Rates low, even using negative rates. Rates did not rise significantly until the 1950’s or 20 years after the Depression started and we are far from such a low. The relative Yield Curve shows that when the 5 year rises above the 10 and 30 year, a recession is likely within a couple of years. This is another clue that a recession is very likely in 2016, and that means at least a 40% decline from the 2015 highs.

US Rates

The Yield Curve is close to a Recession

An inverted Yield Curve used to warn of a recession but the Central Banks have distorted rates quite a bit. The ratio of the 5 and 10 year rates is currently the best to detect the large shifts in allocation necessary for a +20% decline. This indicator is failing for the second time after breaking the bullish trend line, which is a warning like in late 2000 and 2007.

US Yield Curve


February 2016 Currencies Forecast

The US Dollar is in a Bull Market

The US Dollar will most likely drive much of the moves in other currencies, since it has the largest monetary base and is used to price so many materials. In this chart we look at the other two major currencies which is the Japanese Yen and Euro. We also look at the Canadian Dollar which is one commodity related currency and almost tracks the Australian Dollar.

Most Currencies are driven by a 16 to 17 year cycle

The 17 year cycle is the Cicada reproductive cycle, and has been puzzling scientists for many years. Besides being a Prime number, 17 years is also 6,209 days long which is an octave of the well known Fibonacci ratio as in 0.62 x 10,000 = 6,200, but it is also close to π or 3.14 x 2,000 = 6,280. The 16 year cycle is visible in the Canadian Dollar since 1921, and probably as far back as 1860, but the US return to the Gold standard in 1879 kept the exchange rate flat for 32 years and another multiple of 16 years.

Typical Bull Markets in Currencies last 5-7 years

Previous bull markets in the US Dollar have lasted 4.5 to 6.5 years, and we can find the same range in previous bull markets in the Yen and Canadian Dollar. Since the US Dollar started its bull market in 2011, then we would expect it to last until January 2016 to January 2019 which is a big range and needs to be fine tuned.

The little known Rotation in Currencies

The last two cycles unfolded in a rotation from a US Dollar bull market, to a Canadian Dollar bull market and then a Japanese Yen bull market. This makes some sense, since a strong US Dollar is often driven by a strong economy. This increases demand for commodities and their currencies like the Canadian Dollar. There is also the indirect effect of Asian manufacturing first increasing its purchases, and then its currency surging from the increasing exports of manufactured goods. Today, most manufacturing is done in Asia, and this should magnify this rotation, but the Yuan will likely be the next beneficiary after the commodity currencies have their bullish run.

Historical Currency Relationships

The US Dollar is mirroring the period between 1988 and 2002

From the early 1988 low to the fourth and final low in mid 1995, we saw three rallies of about 20-25% each over 7.5 years. A similar behavior can be seen from the early 2005 low to the to the fourth and final low of mid 2011, we saw three rallies of of 15-25%. From the final low of 1995, we rallied from about 0.80 to 1.20 or 50% higher in 6.5 years. Should the current US Dollar rally behave the same, we should reach about 0.70  x 1.5 = 1.05 which is the strongest resistance left before 1.20 is even possible. From the current level of 1.00, this leaves little room for a move higher, and is probably why the US Dollar is struggling. Once we pull back to 0.90 or so, the risk/reward will be better and speculators will be more inclined to buy for the 15% move up to 1.05.

There is a relationship which could send us to the 2002 high of 1.20

The move up from 1995 low near 0.80 paused twice at the 1.5 and 3 year mark before the final rally of 3 years into 1.20 in 2002. We see something similar from the 2011 low, except that the first pause was 3 years later in 2014, and we could see the second pause 3 years later which is mid 2017. The moves are lasting twice as long today, and if we reach 1.05, then the gains will be double as well or 50% today vs. 25% in 1998. This suggests that we could extend the US Dollar rally from a 2017 low to a 2020 high near 1.20 for a gain of 70%. The probability of this happening is low considering the length of previous bull markets, but a move above 105 that lasts will increase its probability significantly.

The Yen ended a 61 year Bull Market and should decline for a decade or two

The Yen started a bull market in 1950 lasting 61 years and rising over 10 times which suggests a move down lasting at least 8-9 years into 2020, but probably 25 years into 2036. The price targets are at least 50% of 120 points or 0.70 and more likely the 62% level and post WWII high near 55. It could even be worse with the Japanese facing a serious demographic problem as soon as 2030 when two working Japanese will have to support one elderly. Unless they change their deep rooted aversion to immigration, there is little that robots and women joining the work force can do to help this worsening problem each year.

Yen Historical Chart

Why use Financial Astrology

Solar and Lunar Effect on Stocks

Many studies have proven the Moon’s and Sun’s effect with some shown below. The other planets are not so easy to detect with their slow movement far away from the Earth.

Stock Market Lunar Returns

Lunar Cycle effects in Stock Returns – University of Michigan
Lunar Phases and Stock Returns – University of Michigan
Autumn Panics: A Calendar Phenomenon – Christopher Carolan

Recessions and Solar Sunspots

The maximum in Sun Spots almost always precedes a recession. The 1969 Sun Spot cycle high was a lower high than the previous cycle high and gave us the Bear Market into early 1975. The developing 2014 Solar cycle 24 high may also be a lower high as the forecast by NASA suggests and a recession in the next 2 years and a possible Bear Market into 2020 are real possibilities.


Recessions and Sunspots

Geomagnetic Storms and the Stock Market – Federal Reserve of Atlanta

Sunspots, GDP and the Stock Market – Theodore Modis

Financial Astrology is based on emotions

As Edgar Cayce said below, the Sun and the Moon affect us in a visible way and the two most used Calendars in the World are based on the Moon and the Sun. Sunny days do affect most people positively and are called blue skies by the bulls. On the other hand, we often refer days without Sun as gloomy and depressing.

Astronomy is considered a science and astrology as foolishness. Who is correct? One holds that because of the position of the earth, the sun, the planets, they are balanced one with another in some manner, some form; yet that they have nothing to do with man’s life or the expanse of life, or the emotions of the physical being in the earth. Then, why and how do the effects of the sun so influence other life in the earth and not affect Man’s life, Man’s emotions?

Fibonacci Spirals are Common

Note that the 1974-75 decline, and both the 1987 and 2008 crash happened just past the Sunspot cycle lows which puts a possible 2008 style crash window near 2020 which also happens to be the end of the Fibonacci Spiral from the creation of the USA and may be the biggest crash seen since the South Sea-Mississippi bubble and Tulip mania.

Fibonacci Spiral
1788 – US Constitution
+ 89 = 1877 – Great Rail strike
+ 55 = 1932 – Great Depression
+ 34 = 1966 – Major Top
+ 21 = 1987 – Market Crash
+ 13 = 2000 – Major Top
+ 8 = 2008 – Market crash
+ 5 = 2013 – ???
+ 3 = 2016 – 4 year High ???
+ 2 = 2018 – 4 year Low ???
+ 1 = 2019 – ???


52 / 4 = 13 year Season
1896 – Low 1903 – Low
+ 13 = 1909 – High + 13 = 1916 – High
+ 13 = 1922 – Low + 13 = 1929 – High
+ 13 = 1935 – High + 13 = 1942 – Low
+ 13 = 1948 – Low + 13 = 1955 – High
+ 13 = 1961 – Low + 13 = 1968 – High
+ 13 = 1974 – Low + 13 = 1981 – Low
+ 13 = 1987 – High and Low + 13 = 1994 – Low
+ 13 = 2000 – High + 13 = 2007 – High
+ 13 = 2013 – High ??? + 13 = 2020 – 4 year High ???
+ 13 = 2026 – ??? + 13 = 2033 – ???

Astrology was once Accurate

Astrology or the study of the effect of heavenly objects on life is a complex and lost art. Few, if any understand well today, but the most accurate Astrological prediction is written in books from different cultures that are thousands of years old.

Astrologers, or Magi correctly interpreted the light seen in the sky over 2000 years ago as the coming of a Messiah that was to change and or rule the world. This prediction was taken so seriously as to cause the slaughter of thousands of children to prevent it from being fulfilled.

We all know the result: Jesus or the Christ went on to become the largest influence of the last 2000 years and the Christian Churches ruled financially and politically for many centuries.

So we know that with the correct knowledge, Astrology can be quite powerful in its predictive ability, and was once trusted enough to mobilize armies against its predictions.

Most modern Astrology is too distorted, and the most accurate knowledge is the oldest you can find about Astrology. The Roman and Greek mythology is full of mostly correct interpretations, and the older Persian and even older Hindu sources must be full of gems, but are not readily available to everyone.

The oldest source of Astrology is Atlantis. When their continent sank, three escaping groups took their knowledge to the rest of the World. The Maya which then passed it down to Native American lore like the Hopi. The largest group went to Egypt and their knowledge filtered down into the Middle East, Persia and probably Asia. The smallest group went to the Basques and their knowledge migrated into the Etruscans, Greeks, Romans and was later mixed back with the Middle East version.

Mosaics in the Middle East show Jewish, Christian and Astrological symbols all together in temples. No one can deny that Jesus possibly picked 12 disciples to represent the twelve signs, or fundamental types of people. The same can be said about the 12 tribes of Israel.

Financial Astrology and Stock Market

The Sun has the greatest effect, being the source of the Sell in May and Christmas rally seasonal cycle which are well documented. The Moon is second and the effects of the Lunar cycle on stocks is also well documented. Followed by Venus, which represents Love, Beauty, Desire, Fertility and Prosperity in Greek-Roman lore.

Others bodies are slower moving and their effect is not as obvious. Saturn is known as Kronos or Father Time and the God of Agriculture or the well-known Reap what you Sow Karma planet. It can mark major turning points like the sub-prime debt high of 2007, but its effects are not always financial, or affect stocks directly or not.

The Venus effects on Stocks

The importance of Venus can be seen in the chart on the right which helped to successfully identify the low on March 6, 2009, but also highlighted the October 10, 2002 low, the 2007 high, the April 2001 low and may signal a late July 2015 high as well.

The lows can be extremely accurate with Venus turning retrograde on October 10, 2002 at 14:35 and the market bottomed near 10:00am which is about 4 hours early. Venus also turned retrograde on March 6, 2009 at 13:17 and the market bottomed near 15:00 which is about 4 hours late.

The greedy highs are not as emotion driven as the fear filled lows, and the effect of the planets is expectedly slower and less exact with Venus turning retrograde on July 27, 2007 with the S&P-500 making a high at 1555 on July 19th and basically only exceeding that 1555 for a single day on the October 11, 2007 high of 1576 before returning below 1555 until mid March 2013.


The Saturn effect on Stocks

The effect of Saturn and Venus together can be seen in this rare triple meeting of Saturn and Venus in the sky only two days from the exact October 11, 2007 high, but also highlighting the Venus retrograde of July which made this triple meeting possible, and the August low only off by 3 days.

October 2007 High with Saturn and Venus

The Uranus effect on Stocks

Even the effect of far off Uranus can not be denied with life changing Manias and Bubbles tied to the Uranus cycle as the following event dates show.

The largest Panics all occur with Uranus in Libra or in the opposite sign of Aries which makes the Uranus in Aries from 2010-2019 period critical and where we might see the result of a failed 10+ trillion experiment in money printing if we include Japan, the USA and Euro zone.

In the unlikely event that this Uranus in Aries period turns out to be a malaise helped by the Fed rather than a crisis induced by the Fed, then the next Uranus in Libra period from 2052-59 will certainly be a major problem for the next generation.

  • From The Tulip Mania of 1637 (Uranus in Libra) to the South Sea Bubble of 1720 (Uranus in Libra) there was 83 years.
  • From the South Sea Bubble of 1720 to the 1929 Crash (Uranus in Aries) there was 209 years which is 2.5 x 83 years.
  • From The Tulip Mania of 1637 to the 1973 Crash (Uranus in Libra) there was 336 years which is 4 x 83 years.
  • Going back 83 years before the 1929 crash there were Panics in 1837, 1847 and 1857 (Uranus in Aries)
  • Uranus in Aries from 2010 to 2019 high windows
  • 1973 + 41.5 years = 2014 high +/- a few years
  • 1929 + 83 years = 2012 high +/- a few years
  • 1720 + 7 x 41.5 years = 2011 high +/- a few years
  • 1637 + 9 x 41.5 years = 2011 high +/- a few years

The prophet Edgar Cayce was the only one to predict both the run up to the crash in 1929 and the bottom in employment in 1932. He said this about Uranus, which explains the Bubbles and Manias it can periodically create and burst.

This psychic reading given by Edgar Cayce at the Phillips Hotel, Dayton, Ohio, this 24th day of November, 1923, at 3:30pm
(Q) What effect will the planet, Uranus, have on the people during the next two years?
(A) We find in this planet those of the exceptional forces, those of the ultra forces, those that carry the extremes in every walk of physical life and forces, and these are those that will, in the next two years, especially, give of their strength to the greater force, as has been given.