A surplus of Saturn
Today's Saturn retrograde station leans bearish
Stocks slumped again last week as renewed hostilities between Iran and US sent oil prices back over $90. The increase in oil prices reawakened reignited fears as bond yields rose ahead of this week's FOMC meeting. As usual, the NASDAQ took the biggest hit although the beaten-up semiconductor sector actually posted a small gain.
The decline was not unexpected. While stocks rose in the early week on the exact July 21 alignment of Jupiter, Uranus, Neptune and Pluto, the impact of the double-station near-square of Mercury and Saturn was felt later in the week. As noted in previous posts, the July 23 direct station of Mercury while in a near-square alignment with Saturn was more likely to coincide with some downside.
Our backtest of previous similar alignments suggested this was a bearish influence, especially given the retrograde station of Saturn on July 26. The resulting double-station near-square of Mercury and Saturn has a very bearish track record as shown below in the updated cumulative trend chart. Although Mercury-Saturn squares are quite common and occur at least twice a year, Mercury-Saturn squares while Mercury approaches a direct or retrograde station are rare. In order to best replicate the current alignment, we selected only cases in which Mercury stationed direct while in a near-square with Saturn. A "near-square" occurs when Mercury and Saturn approach a 90-degree angular separation within a few degrees -- two degrees in the present case -- but then Mercury reverses away from it after its directional change.
While the resulting sample consists of just six cases, they nonetheless capture the current planetary set up better than a larger sample of a more common alignment such as a simple Mercury-Saturn square. But the bearish bias in this alignment is clear with a mean peak-to-trough decline of about -3% (and -4% for the median). This is reflected in the fact that the 12-day interval ("0d 12d") following the Mercury direct station reached statistical significance (p = 0.043) as all six cases produced negative market outcomes.
However, we can see that the market effect of the current alignment (red line) is already well below the mean and median. Does this suggest that there will be further downside until at least 9 days after the July 23 Mercury station, i.e. Aug 1? That is certainly the implication of this chart, although we should also consider the possibility that the relative negative performance is manifesting earlier than in previous cases. In that price-based reading of the chart, the Dow Jones Industrial Average may already be close to its low for the current alignment.
An even more bearish price pattern is evident if we limit the sample to include only double stations of Mercury and Saturn. The updated cumulative trend chart below contains just three cases but they most closely match the current circumstance in which Mercury stations direct while in a near-square with Saturn and Saturn also stations a few days later. Here again, the fallout from the current alignment is ahead of schedule as the red line is trending well below the mean and median. The mean peak-to-trough decline is larger at 6% although the low also tends to occur 9 to 15 days after the Mercury station. This projects out to an early August low for the current set up.
The admittedly small sample sizes are good reason to remain skeptical of any additional downside implied in these planetary analogs. But we also have to consider the potential effects of the Saturn-North Node alignment that is exact July 30. The presence of a second separate Saturn alignment within the effective period of the Mercury-Saturn alignment increases downside risk. The 45-degree semisquare between Saturn and North Lunar Node could well be amplified by the fact that Saturn is stationing retrograde today, July 26. Planetary stations tend to intensify market effects and if Saturn is involved, these effects are more often bearish. The updated cumulative chart below illustrates the bearish potential of this pattern which tends to bottom out 20 days after its exact alignment. This translates into an interim low near Aug 19. Its peak-to-trough effect is more modest, however, at -2%.
But this chart includes all Saturn-North Node semisquares (n=27). If we limit the sample to semisquares in which Saturn is retrograde as in the current case, then the outlook worsens. Stocks tend to peak 10 days before the alignment (i.e. July 20) and experience a greater decline on the order of -4%. The cumulative chart below shows the effects of a small sample (n=4) in which Saturn is retrograde while in a 45-degree or 315-degree alignment with the North Node.
We face the same interpretative conundrum here: should this apparent effect be best understood in terms of time or price? If time is the dominant factor, then stocks will have a negative bias until well into August. But if price is emphasized, then stocks may be very close to a bottom here. No doubt, we are better served by trying to combine both time and price effects in order to forecast plausible paths forward. But given that combining still must respect the time variable to some extent, we must still leave open the possibility that market weakness could extend into early August.
Nonetheless, there is some evidence that August could see a recovery. Last week's discussion of the August 12 solar eclipse suggested a possible bullish effect given its conjunction with Jupiter. And our backtest of Jupiter-Uranus alignments argues for some upside in the weeks following its July 21 60-degree sextile. The updated cumulative trend chart below highlights the surprising fact that its most bullish effects occur well after the exact alignment. Its most bullish interval was the 20 days following the sextile in which 12 of the 13 cases tested were positive and had an average gain 2.58%. The result was significant with a p-value of 0.018. Translated to the current period, this would suggest its most bullish influence will felt from July 21 to Aug 10, although it may remain a bullish influence until Aug 20 and beyond albeit somewhat less strongly.
Implications for this week
In light of the bearish track record of these two separate Saturn alignments, it is difficult to make a bullish case for markets this week. Both the Mercury-Saturn near-square and the Saturn-North Node semisquare seem more likely to coincide with further downside before their negative influence subsides. This week is more likely to manifest these declines than, say, next week or the week after.
But we are also entering bullish post-alignment period of the Jupiter-Uranus sextile. This suggests that the predominance of bearish influence should give way to a more favorable sentiment profile at some point during the month of August. It is even possible that transition from bearish to bullish may start as soon as this week, although this seems less likely.
Disclaimer: Not intended as investment advice. For educational purposes only.