April 29th, 2010

Lunar Phases: Redux 3

A brief follow-up to the moon-bugs out there. One more notch in your belt. The lunar cycle theory was true to form once again for the phase that ended with last nights full moon. Here’s the scorecard:

Many of you are probably yawning right now and saying to yourselves “Please, not again about the lunar cycle!” The more astute among you out there will find a light bulb turning on above their heads and will be shouting “Eureka!”.

We’ve complete eleven complete cycles since I started posting these statistics providing some startling observations. The most important is that the waning to new moon periods produced a sum total return of 30.79 while the sum total return of the waxing to full moon periods was a loss of 5.42%.

You can use this “reality” in any way you might want but here are a few:

  1. Use the lunar cycle to temper your expectations. If we’re in a waxing to full moon period, expect the market to wind up lower than when it started; if it winds up being higher that count that as a windfall (this is basically the most I expect from the lunar phase theory).
  2. Time trading decisions according to the lunar cycle since your might at least get a jump start towards your goal. If you’re thinking of selling stock, do so during the waxing to new period because the there’s a high probability the market will trend lower over the next cycle and, vice-versa, if you you want to buy, do so during the waning to full period since stocks have a high probability of being higher in the next phase (sorry, I just go this far).
  3. Finally, dump all your stocks, switch to trading the SPY only (or its souped up Ultra or 2x cousins) and buy and sell them at the beginning and end of each phase. (mechanistic but, who knows, it might just work and it eliminates the need for stock selection?)

Where are we now? If it follows suit one more time then the S&P 500 should be higher than 1191 on May 14. How much, I can’t say but if you throw out the two negative results (especially the one for June 22, 2009), then the average of 3.97% for each of the ten remaining months produces a close on May 14 of somewhere between 1230-1240. O.K., everyone load up the trucks.

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