January 12th, 2010

Lunar Phases: A Follow-up

My apologies for not keeping up with the blog but family duty calls. I had to travel last week to bring my ailing 90+ year-old mother out of the rehab center and into hospice care. She’s survived a long, eventful and some might say traumatic life (a Holocaust Survivor). The odds of her recovering is slime so the best I can hope for is that her remaining days, weeks and perhaps months are painless and worthy of living.

Now back to some more mundane topics. Over the past week, there were a number of topics I thought I’d write about when I returned such as whether there’s any truth to the “January Effect” or all the comments from those of you who relish in pointing out the market’s strength and resistance against falling into a correction. But I need to first respond to one comment from Clueless asking for an update to “Lunar Phases and the Stock Market” of November 16; Clueless wrote “guru, u once mentioned lunar cycles/markets- why is this not a bi-monthly topic? Why only was it only relevant that 1 time??Please update us.”

Fair enough. I feel a need to respond because charting’s skeptics, those who consider technical analysis akin to astrology or tarot card reading, use discussions about the lunar phases as evidence for their criticism. Honestly, I’m not sure there is a causal relationship between lunar phases and the stock market (in much the same way as I don’t know if there is any causal relationship between Fibonacci lines, arcs or fans and the market’s movements) but I do think the correlations are interesting.

Mapping the uncanny congruence between lunar phases and the stock market does look better in retrospect than when anticipating the future. As I wrote in November,

“The market finished higher than where it started in 5 of 6 green periods and finished lower than where it began in 4 out of 6 red periods. Assuming that waxing periods (growing to full) are coincidental with market declines while waning periods (shrinking to new) are coincide with market increases, then market has been in sync with the lunar cycle 75% (9 out of 12) of the time for the past 6 months. I’ll take those odds any day, that’s enough for me.”

The relationship wasn’t perfect then but it was still closer than randomness would indicate. And what has happened since:

There has been nearly two complete cycles of lunar phases and the market through most of it the market remained essentially flat:

I would call the period from November 16 a draw (perhaps underscoring the market’s underlying strength); we’re approaching a waning (approaching a New Moon) when the market should gain and it looks like that’s how it will end this Friday.

And what does the future hold? You keep your own tally:

Not to worry! We’ll check in on the Lunar Phases discussion in a couple of months.

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  • Anonymous

    In the days surrounding full moons, monthly lows are found. In bull markets (S&P > 200dma), we buy on the dips.

    Therefore: buy on the dips around full moons in this bull market.

    In bear market's, look for the month's peak in days around the new moon (key word is 'days around').

    ….

    Your mother lived life as a champion. Surely she embodies an indomitable spirit that we all desire to have. I'm sure she is and has been a wonderful inspiration to you and your family.

  • Z

    I've always been fascinated with lunar phases and the markets, but some people must think I'm crazy..

  • Anonymous

    Numerous correlates can be produced between moon sun cycles and financial activity. Probably the best site on this topic is http://www.davidmcminn.com

    A little skeptical at first, but after looking into it I was impressed.

  • J. Adams

    Also note that 1/15 was a solar eclipse. See my blog for some analysis and here's a good reference link.

  • J. Adams

    That reference link was no good. Try HERE.

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