Investing with the Moon

Outlook September 6

Posted by Danny on September 6, 2010

Stocks rose sharply last week and with another week of Green Period to go, we can look forward to additional gains this week.

The chart situation is worthy of a closer look (S&P 500 Index, click for larger image):

The market found support near the 1040 level at the end of the previous Red Period.
The early July lows were not revisited.

Now we have quickly gone up to 1100, where the market is running into a down trend line that comes off the April highs.
Given the current momentum and still being in Green Period, I think we will break above this line and get towards 1120-1130, a strong resistance zone where the S&P has failed twice recently. That would be a good level to take some profits and prepare for the upcoming Red Period again.

That’s the scenario for this week.

Cheers, Danny

7 Responses to “Outlook September 6”

  1. klout said

    danny….thanks for the update

    i know u use lunar phase distance declination and latitude to determine red and green periods. can u explain how u determine red or green???

    thnaks a ton


    • Danny said

      Hi Klout,

      Green Period starts about 3 days after a Full Moon.
      Red Periods start roughly 3 days after a New Moon.
      Of course not always the market will peak exactly on the last day of a Green Period, or bottom on the last day of a Red Period. That would be too simple.
      That’s where lunar distance, latitude and declination extremes come in.

      A recent example was the August 9 high. There was New Moon on August 9 and a Lunar Distance extreme on August 10. This turned down the market even though there were still a couple of days of Green Period left.
      The chart situation was set up for that outcome, as we mentioned that week:


  2. Public trader said

    Danny, as always your posts are valuable and helpful. I had a question on how the red/green period perform in a trending market. Right now we are in a range bound / mean reversion mode kind of a market. This seems to go very well with the alternating red and green period concept. However, how did the red and green period concept worked in a generally uptrending or downtrending market? For example how did it perform in 2009 when we have continuous and relentless bouts of uptrends that probably ignored such alternating periods? What would you recommend in such a case?

    • Danny said

      Hi Public Trader,

      Using the Red/Green Periods has worked well over the 60 year period I used in my research. But obviously there have been periods when it didn’t work as well as it has done recently.
      But that’s quite normal.

      To your question.
      What happens during a strong trending up market?
      Two things are rather typical.
      In a very strong bull run the market may keep going up even throughout the Red periods, but usually it doesn’t rise as strongly. So there is still outperformance in the Green Periods vs. the Red Periods.
      Secondly, even in a multi-month bull run there are brief corrections or pauses.
      What we see is that these happen more frequently during the Red Periods, but usually they do not stretch over the entire Red Period. In a bull run the corrections tend to become shorter in time. Then what you often see is that the market resumes its upward course several days before the end of a Red Period.
      In a strong trending down market we get the reverse.

      If you take a look at our performance page, then you can see what I mean. From July 2009 till April 2010 we were in an up trending market, rising over 20% during that time.
      For the Red Periods, when we expect weakness, you can see that it was very much a mixed bag. Sometimes there was a small gain, sometimes a small loss. (But it did catch the late January decline, the biggest drop during this up trend)
      Looking at the Green Periods, when we expect strength in the market, you can see that all were profitable in the July 2009 – April 2010 period.
      The average gains in the Green Periods were much larger than the gains (if any) seen during Red Periods.

      That’s why we not only use the lunar cycles to make a prognosis for the upcoming week(s), but we also use it to get a ‘read’ on the market. The actual performance during subsequent Green and Red Periods tends to give clues about underlying strength or weakness in the market. This ‘reading’ the market is sometimes the more important part of the entire approach.


      • Jason said

        Thank you for your analysis.

      • Public trader said

        Thank you very much for your detailed response, Danny. Your strategy indeed seems to be working and appears quite sound. It will be interesting to see what other kind of prognosis could have helped to avoid those rare green periods such as (2 May – 17 May) when the market went down. I know you also do solar analysis and couldn’t help but wonder if the solar signals during the 2 May – 17 May were exception enough to give a warning signal. Thoughts?

      • Danny said

        Yes, we use the solar cycles on our 4P Finance blog.

        But it is not necessarily so that combining two approaches will lead to better results or avoid losing periods.
        Combining two systems can also be like mixing water and oil.

        I think losing periods are part of the game and one should try to handle them with a proper stop-loss, rather than looking for a ‘perfect’ system.
        The problem is that by adding more factors or indicators in the analysis, with the hope of eliminating losing periods, one would also introduce more confusion when the various factors give opposing signals.

        One thing that succesful long term investors seem to have in common is that they use rather simple methods or approaches.
        There is only so much complexity that our brains can handle.


Post a comment (disagreement also welcome):

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: