As the polls for the U.S. Presidential election goes, so goes the U.S. stock market. And as the U.S. stock market goes, so goes most of the other stock indices in the world. If the U.S. election were being held today, Democratic challenger John Kerry would likely win in a landslide. And for good reason too. Instead of focusing on his own positive character traits, President George W. Bush and his Republican supporters have chosen instead to focus on John Kerry’s allegedly negative character traits. The result of such a campaign in the past two weeks has been disastrous for the Bush Republicans, who have fallen considerably behind in the polls at this point. And as President Bush’s poll numbers fall, so too has the U.S. stock market – and in sympathy, so too have other stock markets of world - during this period.

But this development was not unexpected to readers of this column. A bounce upwards for John Kerry was anticipated going into and immediately following the Democratic National Convention in late July. Our forecast was that his popularity would likely increase even afterwards, into August 6-18, as we entered one of the most dangerous geocosmic clusters of the year. Stock markets of the world could plummet then, and if so, that would seriously hamper the re-election bid of the Republicans and George Bush, especially if prices fell below their “pre-Presidential Election Year” cycle troughs of March and May. They did that on August 6, and many of the world stock indices continued to fall even lower last week, including the U.S. markets.

Not only that, but last week’s report stated, “This entire period is ‘dangerous’ in a very real, physical sense. All of these signatures have the potential for terrorism, or danger to human lives, whether through natural or man-induced activities.” And indeed we had all of that with two damaging hurricanes striking Florida at once for the first time in a century, plus major fires and typhoons which also took its toll on human lives, as did the deadly military assault on Al Sadr’s militia in Najif, Iraq.

In Europe, the German DAX, Netherlands AEX, and Swiss stock index fell to their lowest levels since October and November 2003. After briefly rising above 3900 on July 30, the DAX plummeted to 3618.70 on Friday, before closing the week at 3647, it lowest level since last November, taking out the double bottom lows around 3800 recorded in March and May. The Netherlands AEX fell to 308.12 on Friday and closed only slightly higher at 310.68. It has not seen these levels since October 1, 2003. The Swiss stock index fell to 5299 on Friday, before rebounding only slightly to close at 5309.80, a level not seen since last November. All these indices therefore took out their 50-week lows of the past March –May. That’s the bad news. The good news is that some of these indices are now in the price objective range given for a primary cycle trough as reported in our recent edition of the SOS World Stock Market Cycles report, and within the allowable time frame of one of the most important geocosmic critical reversal zones of the year. Interestingly enough, there is now intermarket bullish divergence to the London FTSE index, which did not make a new multi-month low last week. Its low was 4289.60 on Wednesday, August 11. This was above the 4283.20 low of July 26, and almost identical to the 4291.00 low of March 24. In a sense, it has now formed a triple bottom, and if that level holds, it will be a base for an impressive 2-5 week rally. But if it breaks…. well, normally I would think the whole deck of cards comes crumbling down. The reason I will not make that type of proclamation now is because Mercury is retrograde August 9-September 2, and as observed time and time again, this is a period in which there will likely be far more “fake outs” than “break outs.” It is a period when many technical studies prove to be unreliable, and many technical analysts will simply go crazy and complain the markets are being manipulated. They probably are, but at least with geocosmics, we have an idea when that is to be the case, and when not to rely upon our technical studies. This is such a time.

In the Far East, it appears that the Australian All Ordinaries are finally breaking down after recoding yet another all-time high on August 3 at 3572.30. Last week they traded well below their 25-day moving average, closing at 3489, their lowest closing level in 2 months. But the Japanese Nikkei and Hong Kong Hang Seng index held up fairly well in comparison to all other markets. The Nikkei fell to 10,737 last Monday, rallied up to 11,091 by Thursday, but then fell sharply on Friday to close at 10,757. It looks like it will trade lower yet. But it is still above the 10,489 level of May 17, when Venus turned retrograde. The Hang Seng closed at 12,359, well above its 10,917 low of May 17, and not far from its recent highs between 12,500-12,600. However, it keeps finding resistance as it bumps up to these levels, which it did again when it hit 12,534 last Monday.

Another market that is not making new multi-month lows but continues to struggle in its attempt to make new multi-month highs is the Argentina Merval stock index. It keeps bumping up against the 1000 barrier after posting a low for this year of 828.34 on May 18. On August 5, just a week ago, it was up to 994.90. But last week it sold off a bit and closed at 934, looking rather weak as we start this new trading week.

In the United States there was plenty of worrisome news this past week to drive down the stock market, not the least of which was President Bush’s surprising fall in popularity in the midst of heavy negative campaigning by Republican support groups across the country, attempting to discredit John Kerry’s Viet Nam record. If the polls are correct, the “discredit Kerry” campaign is turning out to be a huge mistake. Basically the campaign alleges that Kerry lied about his presence in Cambodia on Christmas Eve in the late 1960’s, and that he did not do anything heroic to deserve 3 bronze and silver metals, and hence the “purple heart” for bravery in action, according to many of his military superiors at the time. It seems that he served only 4 month in action in Viet Nam before he earned his third medal, and after three medals, had the choice to remain or go home. Kerry – who was apparently not seriously injured and still fit to “report for duty” – chose to come home a “hero” rather than to continue to serve with his unit in combat. This is but one of apparently many decisions he made at the time that has riled these ex-Viet Nam officers. And yet those who were actually with him on these dangerous missions emphatically state that he was indeed a hero. And it is this later group – those who stand behind him – which the public seems to believe, if we look at the change in favor of Kerry in last week’s polls. It may not have been wise for these supporters of Bush to make Kerry’s service in Viet Nam an election year issue at all, given the mystery still surrounding the President’s own military (or lack of) activities at the time.

On top of the falling polls for the President Bush, the market may have also been concerned about the Treasury report that a larger than expected revenue shortfall for July pushed the Federal deficit in fiscal 2004 to a record 395.8 billion. Or the markets may been shaken by the fact that oil prices soared to a record level of $46.00/barrel, or the earnings reports by tech companies like Cisco were weaker than expected. With all of this, the NASDAQ Composite fell to 1750 on Friday, it lowest level since August of the prior year. The Dow Jones Industrial Average fell to 9783.90 on Friday, lower than last week’s 9793 low, and much lower than the 9850 double bottom lows of May 12 and 17, which were the 50-week and “Pre-Presidential Election Year (PPEY)” cycle troughs.

It is this market data fact that has us concerned, because once that PPEY trough is taken out before an election, it turns the odds sharply in favor of the challenger running for presidency. The only thing that can help George Bush now, as indicated by market behavior, is for the DJIA to stage a 10+% rally before early October. In fact, I would say the DJIA must get back to at least 10,450 before a Bush re-election possibility gets back on the radar screen. He needs to pull the proverbial “Rabbit out of the Hat,” or “Famous Terrorist out of the Cave.” He needs to do something dramatic to counter the disastrous effect of the negative campaign ads aired by his “friends” last week. And lo and behold, the Bush White House announces such a plan last week. The plan is to abolish the national income tax with a national sales tax. Perhaps the only thing despised more than the lingering American military and political troubles in Iraq is the income tax. But, as John Kerry correctly questions, such a sales tax would likely be yet another initiative to benefit the wealthy and cause far more hardship on the middle class and poor of the United States. At least it would get rid of all those government jobs, at taxpayers’ expense, related to the IRS. At the same time, it would also eliminate a lot accountant jobs, which is not so good (unless you happen to despise your accountant and his/her fees).

Astrologically, I have stated before that this is potentially the most dangerous period of the year, August 6-September 15, and especially August 6-18. As stated in prior reports, I thought the stock market could fall - and fall hard – into this period, which it has. I expected – and still do – a bounce up as we enter the period immediately before and during the Republican National Convention, to take place at the end of this month. The Sun will conjunct Mars on September 15, and as reported in The Ultimate Book on Stock Market Timing Volume 3: Geocosmic Correlations to Short Term Trading Cycles, this signature has perhaps the highest correction to 10% or greater reversals in U.S. stocks within 27 trading days. We are in that time band now, but will be through mid-October. If Bush is going to win, he needs the stock market to bottom now and rally into late September, early October. And the rally has to be big – back above 10,450 in the DJIA in my opinion. It can happen, especially as we are falling right into the middle of this August 6-18 time frame. If it does, Bush still has a chance. But if this rally doesn’t get legs soon, then neither will Bush’s re-election efforts.

Please note that I am planning a vacation next week, and there will likely not be an update. The column will resume the following week.

For those who are interested, there are still a few copies left of the second printing of the Forecasts for 2004 book available. They have now been discounted by $10.00, to $30.00, as of this month, while the last box of supplies last. The year is half over, but there are still many critical reversal dates left, which are described in this book. Those given so far have been highly accurate, as they are every year. For more information, please go to our website at www.mmacycles.com.

Disclaimer and statement of purpose: The purpose of this column is not to predict the future movement of various financial markets. However, that is the purpose of the MMA (Merriman Market Analyst) subscription services. This column is not a subscription service. It is a free service, except in those cases where a fee may be assessed to cover the cost of translating this column from English into a non-English language. This weekly report is written with the intent to educate the reader on the relationship between astrological factors and collective human activities as they are happening. In this regard, this report will oftentimes report what happened in various stock and financial markets throughout the world in the past week, and discuss that movement in light of the geocosmic signatures that were in effect. It will then identify the geocosmic factors that will be in effect in the next week, or even month, or even years, and the author’s understanding of how these signatures will likely affect human activity in the times to come. The author (Merriman) will do this from a perspective of a cycle’s analyst looking at the military, political, economic, and even financial markets of the world. It is possible that some forecasts will be made based on these factors. However, the primary goal is to both educate and alert the reader as to the psychological climate we are in, from an astrological perspective. The hope is that it will help the reader understand these psychological dynamics that underlie (or coincide with) the news events and hence financial markets of the day.

No guarantee as to the accuracy of this report is being made here. Any decisions in financial markets are solely the responsibility of the reader, and neither the author nor the publishers assume any responsibility at all for those individual decisions. Reader should understand that futures and options trading are considered high risk.