In America, the big news this past week was that the Dow Jones Industrial Average closed above 10,000 for the first time since May 24, 2002. This is quite remarkable given that it was down to 7197 for a 4-year cycle low just a little over a year ago, on October 10, 2002, and re-tested that level again on March 12, 2003, at 7416. This represents an appreciation of over 35% since March, and nearly 40% since the prior October. As great as these gains sound, they pale in comparison to the gains made in other world markets, like Germany, and even the NASDAQ Composite. But still, it is the Dow Jones Industrials, and it is over 10,000, and the Sun is in Sagittarius for another 9 days, and the end-of-the-year holiday season is upon us.

So what happened? How did this economy and stock market get so strong, so quick, against almost all expectations this year? Given basic astrological factors, like Saturn in Cancer and Jupiter in Virgo, the performance of the stock market is very surprising. Both of these planet-sign combinations would suggest worry and concern about the economic future. Indeed, people are still worried. But it might also mean that corporations have been so worried that they have successfully taken steps to cut back spending, at a time when the U.S. Government has gone in exactly the opposite direction of spending at a record pace. The result has been more money to spend by the American consumer, and an improving balance sheet for corporate America. Interest rates remain low, and will remain low, as promised again by the Federal Reserve Board this week. Taxes continue to be cut (which is a good thing, I think), and the U.S. Dollar continues to plummet to new record lows against the Euro, and that in turn makes American-made goods more affordable throughout the world, and non-American goods more expensive. The bottom line is that eventually this is a recipe for inflation, though it may take a few months to work its way through the pricing system. And it is that lag time that short-term equity investors (isn’t that an oxymoron?) are counting on.

The precious metals’ markets clearly see the writing on the wall, as Gold posted yet another new 7-year high this past week, closing well above 400. I think this is more significant than the DJIA closing above 10,000, but that of course is not what the public pays close attention too, because that is not what commands front page news. The DJIA crosses back above 10,000 for the first time in 18 months, and it is a major headline. Gold closes above $400.00/ounce for the first time in 7 years, the Euro soars to a new all-time high against the Dollar, and you find these stories mentioned in the back of the business section of some newspapers. Why is that? And what does it mean for the future, for surely these markets (Gold and stocks) cannot continue in the same direction for very long, while the Dollar continues to fall.

The long-term answer probably lies in the understanding of the Saturn-Pluto cycle, as discussed several times in past columns. Briefly, interest rates go down, stocks go up, the economy grows, and federal deficits turn to surplus (at least in the USA) from the 16-18 years between the conjunction and opposition of these two planets (1982-2002). But then from the opposition to the conjunction (2002-2020), federal deficits begin to come back, interest rates start to rise, the stock market becomes inconsistent, and the economy starts to falter. This later phenomenon has not yet taken hold even though the opposition has now passed. But the seeds are there for it to happen soon. The Federal deficit has suddenly reversed to record levels from a surplus only two years ago. The economy is exploding, and eventually this means that interest rates will likely start to rise. Even thought the FED says they won’t go up in the near-term, it is also true that they won’t be coming down again any time soon. Maybe never again in the lifetime of most of us to the levels seen last summer when Saturn first moved into Cancer, a sign that also suggests the end to interest rates declines. The time between interest rate accommodations ending, and the tightening beginning, is the time when stocks and economy can have yet another boost. That’s what is happening right now, and perhaps it can continue for much of next year, since it is an election year.

I bring the U.S. election year up because it is obvious that the government of the incumbent party can – and is – doing a lot of things that can enhance its re-election. Stimulating the economy is one thing that helps a lot. Low interest rates, tax rebates, and a lower Dollar all help that, at least in the short term. Another thing that helps an incumbent is concern about national security, and with the Sun-Mars-Saturn T-square happening right on the angles of Washington D.C. at midnight of New Year’s day, that concern is likely to be present for much of 2004. This doesn’t mean that Iraq isn’t able to enter a period of self-government during the next year. It means there will likely be new trouble spots commanding the presence of U.S. forces. And this may happen right around the time that great peace initiatives are taking place, as Jupiter, Mars, Sun, and Mercury all enter Libra September 22-28, 2004, just weeks before the election. If there is such a thing possible, Mr. Bush, who will be undergoing his Saturn return at this time, may claim the role of both a strong commander in chief, as well as recognition as a "peace president."

But back to the stock markets. The German DAX continued to post new yearly highs this past week, reaching 3904.40 on Friday before selling back off to close the week at 3860. This market has now rallied nearly 80% since its lows in March. The Hang Seng Index of Hong Kong also posted a new yearly high this past week, rising to 12,594 on Friday, thereby reflecting the optimism about the growing Chinese economy. But no other markets we report on made a new high last week, which continues to flash "intermarket bearish divergence" warning signals. These markets are so overbought and so extended, that one wonders how long it can last. Well, it can last a little while longer now, especially since 1) the seasonals are now bullish (end of year rally) and 2) both Jupiter turning stationary and Sun trine Jupiter are coming up January 3-9 (thank you Ted Philips for reminding me of that).

For this week, we note that Mercury will turn retrograde December 17, and last through January 6. Mars will also ingress (enter into) its own ruling sign of Aries, also on December 17. This represents a period of shifting sentiment in interest rate outlooks. It can have a reversal effect on several financial markets, including precious metals and currencies. Usually the trend is up in these later two markets, and if so, they may reach a peak of some sort right at the end of the year, when that Sun-Mars-Saturn T-square sets up on New Year’s eve.

I know many are wondering what happened to the expectation that stocks would top out and begin an 8-20% decline in this last quarter. That outlook was in error, as we look back now. That outlook was based upon cyclic studies using October 10, 2002, as the starting point of the new cycle. In that count, the U.S. stock market was indeed due to top out in late summer, early fall, and witness a sharp decline before the end of December. But in retrospect, we can now see that the correct starting place for the count was the double bottom low in March 2003, when most of the other equity markets of the world made a lower low. So, even though we are now passing the time band when the 50-week cycle should have unfolded based on an October 10, 2002 starting point, we are now entering a new time band when this 50-week top and bottom are due starting with the March low. Once again, this cycle count suggests a top could occur at anytime, followed by an 8-20% decline taking 3-12 weeks to unfold, and ending by May 2004. My best guess now is that the cycle tops out in January, with the multiple Jupiter signatures just mentioned, and bottoms in March.

For those who are interested, the Forecasts for 2004 book is now completed, and received back from the printer today (Friday, December 12). For those who have pre-ordered, you should be receiving it this coming week. If you wish to order, please go to our ordering pages. However, we cannot guarantee you will receive any new orders before Christmas, though we will try our best. We also cannot guarantee that we will not run out of books in the next few weeks, for orders in the past two weeks have far exceeded our expectations. We will run out this year, and there will not be a reprint. It should be an interesting year, and there is a great deal of information (forecasts) on the 2004 U.S.A. presidential election, as well as various stock and financial markets.

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.