September 8th, 2010

A Lunar Cycle Strategy

Alright, Lunies, your anticipation is about to be satisfied. Here are the stats for the Lunar Cycle phase completed today (click on table to enlarge):

The moon keeps racking up a good score. Both halves of this month’s cycle turned out to work and by a wide margin. During the Waxing to Full phase, the moon cooperated by taking a whopping 6.17% beating; during the Waning to New phase which just ended, the market climbed 4.47%.

Look at the Index a year ago …. about the same as where it is today. If you all you had done for the last 14 months was buy SSO (the double-long S&P etf) during each Waning phases and SDS (the double-short S&P etf) during each of the Waxing phases since June 22, 2009 (the actual beginning of this experiment), you could have wracked up about a 100% profit ((35.11+12.39) x 2).

The batting average for the past 12 months (24 hits) is still 17 out of 24 correct, or 70.8%. Since the start of of the experiment, correct hits are 21 out of 30, or 70.0%.

Even though the average change each period is small (less than 2%), if you were able to buy options at good prices instead on these securities your profits might have been even better. Since there’s now a reliable track record, I decided to play the game and bought some short-term, in the money call options on SDS as a hedge against my portfolio for the coming 15 days through the next Waxing period.

Just my luck, the market will decide to not cooperate and decide instead to show me who’s boss by busting through the neckline of that inverted head-and-shoulder formation. I can accept that kind of kick in the pants any day.

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  • me

    Dear Joe:

    Thanks for yur new article and I was wondering if you could provide the link or website where I can locate that chart ( Waxing to Full, Waning to New ) is it possible to have 2011 version? Thanks in advance.

    Max

  • Joe

    Max:

    The chart is something I put together in MS Excel combining S&P Index history and any one of many Lunar calendars available from a Google Search. The one I use is:
    http://kalender-365.de/lunar-calendar.php

  • Anonymous

    Joe, what do you make of the 6 month chart for Visa.
    It seems to have a strange but meaningful symmetry.
    What story does it tell or what does it foretell?

    Thanks

  • Joe

    Anon, sorry I don't see the symmetry in V that you do. As a matter of fact, a see a sick puppy. It continues to weaken as the market moves higher. This divergence isn't good … either for V or the market, not sure which.

    But I believe it's not good for V which I can see in the mid- to high-50's before I see it in the low 80's (it closed today at 66.78)

  • me

    Thanks Joe for the link you provided and I was wondering if the lunar cycle strategy also apply to gold market? Well…I did run some dates with gold chart, some fit but not exactly all of them though. correct me if I am wrong.. does it mean buy during the " Waxing to full " and sell at " waning to New " or vice versa?

  • Joe

    "buy during the " Waxing to full " and sell at " waning to New " or vice versa?" I'm not totally convinced about this but continue running the stats to test.

    The test asks "is the market higher at the end of a period (began when full) that ends with a new moon …. and whether it ends lower in a period (began when new) that ends with a full moon.

    It doesn't say anything about purchases or sales made during the interim of the two periods.

  • Anonymous

    compare home builder HOV & $GOLD 10 years chart…from chartist point of view..How can you tell when the bubble going to burst? (ex. HOV's 50 MA crossed 200 & 300 MA @2004 & 2005)

  • Joe

    If you're trying to say that you see a bubble in gold and it will crash the same as home builders (e.g. HOV)did in 2004-06 ….. sorry, I don't see an analogy for a host of reasons.

    Even if you're right, I respectfully disagree that the MA's at this point in time are remotely similar in their alignment or trend.