Last week, several economic reports showed a much stronger U.S. and world economy than expected. The GDP was up sharply (over 7%), productivity rose at a rate greater than 8%, and best of all, the job market showed unexpected growth, both in last month’s figures and the revised figures for the prior two months. All of these numbers were much stronger than almost all analysts were predicting, and in response to these very positive reports, U.S. stock indices rose to new highs for the year.

But, there is a major concern with such strong economic numbers, as one might anticipate with Uranus turning from retrograde to direct motion as trading for the week ended. Unexpectedly strong growth means the cycle of low interest rates is probably coming to end. This, on top of Fed Chairman Alan Greenspan’s statements on Thursday where he “... raised the volume on his alarm over the deteriorating federal budget deficit,” according to the Wall Street Journal. Specifically, Greenspan stated “Recent budget deliberations are not encouraging. The current debate appears to be about how much to cut taxes, or how much to increase spending. No significant constituency seems to support taking the actions that will be necessary to move toward… budget balance.” The italics are Greenspan’s, and highlight these issues.

Rapid economic growth and increasing federal budget deficits are a recipe for higher interest rates. And higher interest rates are a recipe for an economy that will soon be forced to pull back. And along with that, equity indices will eventually begin to fall. All of this is completely consistent with the historical correlation of the Saturn-Pluto cycle that has been discussed several times in this column over the past couple of years. That is, interest rates decline, equity markets rally sharply, federal deficits turn to surpluses, and the economy grows during most of the 16-20 period of the conjunction to the opposition of Saturn and Pluto. The last time Saturn and Pluto were in conjunction was in 1982. Then during most the 16-20 year period from the opposition back to the conjunction, the reverse happens. Government surpluses turn into deficits, interest rates rise, equity markets struggle, and the economy turns sideways to down, and in some cases, turns down very sharply (i.e. recessions and even depressions). The opposition of Saturn and Pluto unfolded in 2001-2002. And the next conjunction is not until 2020. The assumption from this cycle is that the 16-20 year period from the conjunction to the opposition is the time to focus on appreciation of one’s capital. It is a good time to be “in the market.” However, from the opposition to the conjunction, the focus is better placed upon protection of one’s capital. It is a good time to concentrate on saving money, and not being in the market as an investor, but perhaps more as a shorter-term trader.

Still, Chairman Greenspan also reiterated his wish to keep interest rates low, in spite of the improving economy and deteriorating federal deficit. That could prove troublesome for equity markets too, for if interest rates are kept low while the economy continues to grow strongly, you get inflation. And this in turn depresses the value of the U.S. dollar, which is already in a bear market for most of the past year. If the dollar continues to lose value – and it will if other countries raise their rates to support their currencies – then there is danger of foreign investors pulling out of the U.S. equity and bond markets. Whatever they might make in gains in U.S. bonds and stocks will be diminished by what they lose ion the currency conversion.

Already we see other countries starting to raise their interest rates. On Thursday, the Bank of England and Reserve Bank of Australia's interest rate increased, which should serve a s awake up call to investors that a similar action probably lies ahead for the U.S. too. And if it doesn’t, then far greater risks loom ahead, as just described. So, despite the incredibly strong economic numbers on Friday, the market fell, after opening higher. In the true spirit of Uranus going stationary, the numbers were unexpectedly strong, and instead of blasting off to much higher highs, the U.S. stock market instead reversed and started down, ending the day in negative territory. Investors are not stupid. They know history. And they know that once the interest rate picture starts showing reasons for starting to rise again, trouble in the stock market and economy is not far behind.

We are still mired in one of the most populated time bands of geocosmic signatures for the year. As stated before, there are 17 major signatures in effect October 17-November 26. The midpoint of this cluster was Thursday, November 6. Interestingly enough, the U.S. stock market put in its high for the year early Friday morning. In sympathy, Germany’s DAX and Netherlands AEX stock indices also made new highs on Friday. Hong Kong’s stock market made a new yearly high on Tuesday. But other world markets in these regions did not follow suit, which continues to be a dangerous sign of intermarket bearish divergence. Most of these markets are also exhibiting divergences on their weekly oscillator readings too, which are also in overbought territory. This indicates that sometime very soon, a sharp multi-week decline is very likely. Prices cannot sustain this rate of increase for much longer. There is, of course, the real possibility that this decline will now start in the U.S., just as it has in Japan and several other world markets. The heavy confluence of so many geocosmic signatures in effect through November 26 presents a strong argument that the top will be in this period, if it hasn’t unfolded already, either Friday in the U.S.A., Germany, and Netherlands, and back in September or October in the case of Switzerland, England, Australia, and Japan.

Once again readers ask what should they do? And once again I reiterate, as I have since early December 2002: consider putting some liquid assets (cash) into money market funds denominated in Euro, Swiss Franc, Australian or Canadian Dollars. And of course if those currencies start to rise in value, so will the price of Gold and Silver in U.S. dollar terms.

On another matter, I am now well into the writing of the Forecasts For 2004 book. It looks (to me) like the specter of international tensions (terrorists’ threats and consequent military actions) will not diminish next year. And this will be an important consideration in how the U.S. election unfolds. The book will be out December 15, as planned. If you are interested in pre-ordering it, you can do so now via our website at www.mmacycles.com, under “Books” or “Order for MMA.”

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.