May 17th, 2011
My May 5 blog post entitled “Time-Segmented Market Analysis with Lunar Phases” was tweaked on StockTwits so I’m going to have to answer here even though I fear giving the Lunar Cycle Theory more credence than it truly deserves. @fstrtrdr had this to say the next day:
“Lunar phases? Add in the Werewolf and vampire indicators and watch Loonie Tunes for trade ideas?”
Now fstrtrdr’s bio says “My trading records for personal reference only. Don’t follow me since I am almost always trading options against a spread or hedge that would not make a single leg of the trade a good idea.” It’s clear why he/she would have no interest in something that on average runs 20 days. But perhaps the rest of you may.
The intention of that May 5 piece was to put a time perspective on the market’s current volatility, a framework so to speak for market expectations. One common way of doing that is to look at the market’s movement in time-segmented intervals and the Lunar Cycle is, although arbitrary, one way. Basing volatility expectations for the next 20 days based on the volatility over the past year, granted, is just one approach. So on May 5, I wrote:
Although the extreme outside range of change has been from +8.29 to -6.17% for these two week lunar phase periods, the averages have been much narrower: 2.87% for when the market finished up and 2.61% when the market finished down. For the current two week period that will end on May 17, an average move down would carry the market to 1321.21, almost precisely to the level of the 50-day moving average (currently at 1318.18 as of last night’s close). Based on this analysis, my guess (and blatant hope) is that the market will again approach the 50-day moving average as a support and, like it did on April 18, it will again pass the test.
Here we are, April 18, and the intra-day low was 1318.51 with a close of 1328.98. So shoot me, I missed the mark by 0.23% as far as the low is concerned (that’s %, not percentage points!) but the Market lightly kissed the 50-dma and then bounced.
What might we expect for the next phase? I’m not going to risk my record so you make your own guess. Here is the data:
To help you, here’s what the close on June 1 with a range of changes during the next phase:
Good luck guessing! [Psst! I’m going for 1368.85]