Arch Crawford: Bad Moon a Rising

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Martians Invade The Markets
John Dobosz, 08.26.03, 2:40 PM ET

NEW YORK - Anyone gazing upward into the eastern midnight sky cannot miss the red planet's prominent stature on the astral canvas. Because of the new moon this week, Mars is the brightest object in the nighttime sky, and for good reason: On Wednesday night and early Thursday morning, Mars will be at its nearest distance from Earth since the year 57,617 B.C. It won't be this close again until the year 2287. Market strategists who put stock in financial astrology regard the Martian perigee--and several other traditionally bearish astrological phenomena--with trepidation, and say that deteriorating market fundamentals and technicals presage a pullback in September.
You can stop laughing now. Believe it or not, financial advisories that use astrology to time the market have performed exceptionally well over the last three years. One top-performing service is Crawford Perspectives, which according to Timer Digest is up 32% in the last 12 months. Says editor Arch Crawford, "The meanings for Mars are war, explosions, desire, anger, and also major revolution and economic warfare." Since Aug. 6, he's been 200% (fully margined) short the S&P 500 Index, based on ominous astrology and more traditional signs that the market is topping, including several indicators that haven't been so bearish since 1987, such as insider selling and extreme bullish adviser sentiment, as well as steeply rising bond yields. Crawford also cites a declining ratio of new highs to new lows, as well as a rising Volatility Index (VIX). A break above 24 or 25 on the VIX, says Crawford, would be the definitive signal that a sizable market decline is under way.

Mars' current proximity to Earth, says Crawford, makes violence and natural disasters more likely; as a hedge, he's buying gold and gold shares, and advises shorting exchange-traded funds like the Diamonds (amex: DIA), Spyders (amex: SPY) and the Qs (amex: QQQ). Since June, according to Crawford, Saturn has been in the sign of Cancer (zodiac symbol of the United States and President George W. Bush). This also implies constrictions on the U.S.--specifically more weakness in the dollar.
Besides the Martian influence, Bill Meridian of Cycles Research sees Jupiter opposing Pluto and Uranus as bearish formations. Jupiter-Pluto is associated with terrorism and mayhem (it occurred just before Sept. 11, 2001), and the Jupiter-Uranus opposition has coincided with an average Dow drop of 2% since 1915. Add in that Sept. 5 is the average high point for stocks during the year, and Meridian is forecasting a September decline in the Dow, S&P and Nasdaq--which is also traditionally weak in September. Look for lows in October, 6% to 8% off of the Sept. 5 high.

Financial stocks have already begun a downtrend, says Meridian, and he recommends bearish plays like buying puts on American Express (nyse: AXP - news - people ) or shorting J.P. Morgan Chase (nyse: JPM - news - people ) and Citigroup (nyse: C - news - people ). Like Crawford, Meridian is also buying gold stocks, Newmont Mining (nyse: NEM - news - people ) in particular.

"Raise cash, be cautious, and buy gold if you don't already own some," counsels Henry Weingarten, editor of Wall Street Next Week, who has short positions on all three major stock indexes. Wednesday's new moon combined with Mars' historic proximity, says Weingarten, indicates that a swing toward bearishness is in the works. He recommends shorting Nasdaq tech stocks with price-to-earnings ratios greater than 100, such as eBay (nadaq: EBAY - news - people ) and Yahoo! (nasdaq: YHOO - news - people ). Also, he points out, Cancer is the sign of the home--meaning that real estate will suffer along with the U.S. and President Bush. Weingarten calls it a "crash," and says the stars and rising rates are conspiring to bring it on.
Even if you don't buy these planetary predictions, a look up into the night sky will showcase Mars shining bright, just as it does every August. It's a visible reminder of the presence of cycles in nature. Markets also tend to move in cycles. These bears are merely predicting that the intense rally since March will at some point run its course, too.

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