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Investing with the Moon

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Questioning financial astrology – part 2

Posted by Danny on October 31, 2013

To understand this article, please read Part 1, where it was explained how longer term astronomical cycles are very hard to test because we have only about 200 years of stock market history. Not only that, there are so many astronomical or astrological cycles to chose from that it is almost inevitable that there will be a few of them that seem to match historic stock market movements quite well. Correlation is not causation, so we cannot be confident that these observed long term patterns will recur.

But that doesn’t mean we have to give up on trying to find and use long term cycles. When different cycles/rhythms are at work simultaneously, then combined cycles may emerge. A well known example is the ocean tides. Both the moon and the sun have a significant gravitational pull on our planet and that results in tides. The tidal cycle is in harmony with both the solar and lunar cycle, but differs in length from both of them. We can also consider the example of a musician who strikes a chord on his guitar. He is hitting two or three different strings/tones at the same time, but what we hear is the combined tone. In the same way, if planets have an effect on stock prices they are likely to do so through some combined cycle.
And then all we need to do is find that combined cycle. Just like the captain of a ship only needs to know the tidal cycle to know when he can enter or leave the harbor. He doesn’t need to know the cycles of the constituent parts: the sun and the moon. In the same way, if we can find a combined cycle of planets that rhymes with the stock market then we don’t need to consider any individual planetary cycles of Mars, Jupiter, and so on..
This is the ancient idea of harmony of the spheres as proposed by Pythagoras.

All nice and good, but can we find such a combined cycle that may work in the stock market?
This is a matter of resonance, so we need to find a cycle that pulls in all or most of the planets at a harmonic multiple of their individual cycle lengths. Planets do indeed tend to resonate at harmonic frequencies, see: Orbital resonance
.

So let’s start with our nearest neighbors, Venus and Mars. Venus needs 224.7 days to orbit the Sun, while Mars has a cycle of 686.97 days. They conjunct each other every 333 days (heliocentric), but the more interesting period is 666 days, because then they return to the same part of the sky with only a small drift every 666 days. This is the combined cycle of Mars and Venus, and you may want to watch it. Look what happened 11 months ago and 22 months ago, and see if things repeat.
But it gets more interesting when we can include even more planets.

For example, if we consider 7 of these 666 day cycles, thus 666 weeks or 4666 days then we get this movement:
4666 / 224.7 = 20.765 cycles of Venus
4666 / 686.97 = 6.79 cycles of Mars
4666 / 365.256 = 12.775 cycles of Earth

Notice how we have very close to three quarters of a cycle in each of these cases. This means that now 3 planets, Venus, Earth and Mars return to the same relative constellation in the sky, but with a 90 degree drift every 666 weeks.

The 666 day frequency also has an interesting connection with the planet Jupiter. Jupiter orbits the Sun in 4332.59 days (11.86 years).
Dividing 4332.59 / 666 = 6.505
So two Jupiter orbits, 8666 days = 13 * 666 days

The implication is that by considering the 666 day and 666 week cycles you are basically using a combined cycle of Venus, Earth, Mars and Jupiter. That’s why some cultures considered the number 666 so significant.

In the same way we can also look at Saturn and beyond.
Saturn has an orbital period of 10759.22 days (29.46 years).
We get a resonance with the Jupiter cycle when we consider 3 cycles of Saturn:
3 * 10759.22 days = 32277.66 days
32277.66 / 4332.59 = 7.45 cycles of Jupiter.
So for every 3 cycles of Saturn we get very close to 7.5 cycles of Jupiter.
This is a 88.37 years period and it is also interesting for other reasons. It is almost exactly 8 sunspot cycles ( 11 years), and it also resonates quite closely with Uranus ( 84.3 years cycle) and the half cycle of Neptune ( 164.8 years). This could well be the longest combined cycle that has use in the stock market.

Is there is any evidence that these cycles are at work?
Well, I have looked into long term correlation on stock data going back to 1790, and for the 666 day cycle the result was negative. For the 666 week and 88.4 year cycles a positive but weak correlation is found. So, at best, these planetary cycles have weak effects that are easily overthrown by other factors.

In the case of the 88.4 year triple-Saturn cycle we also have some visual confirmation on a long term chart. This is the Dow Jones index since 1790 (click for larger image):

88 year triple Saturn

On a 200 year monthly chart we see two similar periods standing out: 1830-1840s and 1920-1930s. In both cases the market surged to a significant peak that would not be surpassed for more than 20 years, only to drop towards a 30 year low within years. If this has anything to do with the 88.4 year cycle, then look for a major peak within the next few years, followed by a massive crash that takes the market to 30 year lows. Based on the earlier major peaks in 1835 and 1929, we would expect this blow-off peak to occur between 2012 and 2017, followed by a major low in 2020-2022.
As we have only two observed cycles it remains to be seen whether this pattern will show up. But if it does we would get some nice confirmation for this 88 year cycle.

If 88.4 years is indeed a major wavelength in the stock market, then we would also expect so-called overtones or harmonics. Overtones occur for a number of reasons, and most typically they are integer multiples of the main frequency. For example if we divide 88.4 years by 5 we get 17.68 years. This could be the 17.6 year cycle that Kerry Balenthiran has proposed in his recent book. It is exactly 3/5th of the Saturn orbital period.

Another long term cycle that has been getting attention is Martin Armstrong‘s cycle of pi, 3140 days (8.6 years). This is a supercycle of Venus:
3140 / 224.7 = 13.974 cycles of Venus.
It is also quite close to 2/3rd of the 4666 day cycle.

Actually, if 3140 = 1000 * π (pi) , then 4666 = 1000 * δ , the first Feigenbaum constant, which is as important for chaos theory as pi is for geometry.

With that I will finish this exploration.

Here are the weak correlations found for the mentioned cycles, ranked best to worst (based on 200 years of monthly changes):

4666 day :   + 0.034
88.4 year: + 0.0339
17.6 year: + 0.0128
6280 day: + 0.0128
333 day: + 0.0067
666 day: – 0.008
3140 day: – 0.0307

 

Be well,

Danny

 

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Questioning financial astrology – part 1

Posted by Danny on October 10, 2013

From time to time I get questions whether I use other planetary cycles besides the moon. Astrologers tell me to watch out for the next opposition of Jupiter to Saturn, or warn me that Uranus will be going retrograde next week. What about the Bradley indicator? Or the solar cycle?

So let’s have a look at financial astrology and why I don’t use most of it.

The problem with most planetary cycles is a simple one: we don’t have enough stock market history to reliably test any cycles that are longer than a year. For example, the planet Jupiter takes about 11 years to complete one cycle around the sun. Since the start of the New York Stock Exchange the planet Jupiter has completed only about 20 cycles. How much statistical confidence can we have in whatever conclusions we might derive from these 20 observed cycles?
Maybe stocks have gone up when Jupiter was in Aries 14 times out of the observed 20. Should we then bet on the market going up again the next time Jupiter enters Aries?
Well, there are 12 different star signs, so it is completely normal that stocks will have been a bit more “lucky” when Jupiter was in one of those signs (could be in Aries or any other one). So, the answer is no because this can easily be the product of random chance.
Imagine you see a person toss a coin 10 times and get tails 7 times. Would you then bet that he will obtain tails again on his next try?

The statistical significance is just too weak when we have 20 or less observed cases.

But that’s not the only problem. Let’s say we continue to search and find some cycle that matches the stock market history in a way that is very unlikely to be the product of random variation, maybe at a 99% confidence level (see: p-value). That’s something we can use, right?
Well, not so fast.
We have now run into the “look-elsewhere effect“. We looked in all the different planets, we looked in combined cycles like Jupiter-Saturn conjunction cycle, we looked into different aspects, we looked into retrograde motion and heliocentric cycles, we looked into planetary nodes, and so on… until we found something that “worked”.
But if we look in a few hundred methods and cycles of different lengths it is completely normal to find a few that stand out at the 99% confidence level.
This is no different from continuing to toss coins until you manage to produce heads 7 times in a row. It will happen sooner or later.

So, apart from the problem that we don’t have enough market history to test most planetary cycles for stock market effects, we also have so many different astronomical cycles and astrological methods to test that we are guaranteed to find a few that seem to work very well over a given test period for a given financial instrument. Are we then looking at the hand of luck from the look-elsewhere effect, or is it a genuine market cycle?

In a second part I will present another take on long term planetary cycles, and a possible use.

Stay tuned,

Danny

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