As befits the waning days of Pluto’s reign in Sagittarius, optimism on Wall Street prevailed over the facts. “What has happened is the Fed is flooding the system with liquidity and eventually we should see some traction in the economy,” said Steve Goldman, chief market strategist at Weeden & Co. “And stocks tend to respond first.”

This strategy, which worked well while Pluto was in Sag and optimism drove the markets, will not work so well with the more pragmatic approach Pluto will take in Capricorn where facts and technicals rule over fantasy. After the cut in the Fed rate, investors’ optimism soared, only to be brought back to earth with the revelation that the US federal deficit has ballooned to 219 billion dollars.

I’m anticipating the next week to continue in this same fashion, but with Mercury’s retrograde turn on the 28th and Pluto’s entry into Capricorn that week, we are likely to see the contraction that has been a long time coming.

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