LunaticTrader

Investing with the Moon

Posts Tagged ‘stocks’

Key reversal levels for week of July 28, 2014

Posted by Danny on July 27, 2014

Our key tables and comments for this week, now in slideshow format (click on “Slideshare” if you want to watch in fullscreen, or save and print it).
If you have any trouble to see the presentation below, then you can also click here.

Good luck, Danny

 

Posted in Market Commentary | Tagged: , , | Leave a Comment »

The myth of Mercury retrograde

Posted by Danny on October 22, 2013

A reader asked me what to expect from the Mercury retrograde period that is starting today.
I am getting that question from time to time. Will it bring more volatility? Will stocks go down? Will communications fail?
I did some research on the Mercury cycle recently, so this is a good opportunity to share the results.

I simply used the Dow Jones Industrials data from 1900 onwards, and compared stock market returns on Mercury retrograde days versus the normal Mercury direct days.
With over a century of data, the sample has almost 6000 Mercury retrograde days and more than 24000 Mercury direct days.

The result?
Over this 113 year period, the Mercury retrograde days produced an average 0.0205% daily gain, while the Mercury direct days generated an average 0.01822% daily gain. So, the Mercury retrograde days actually did a little bit better than the average day, contrary to what most (financial) astrologers believe.

I then split up the sample in two periods, 1900-1950 and 1950-2013, but again I found no significant results, with the Mercury retrograde days performing just slightly better in both periods.

Finally I took the 1950-2013 period and split it in two parts again, 1950-1980 and 1980-2013. This gave a more differing outcome.
From 1950-1980 the Mercury retrograde days showed an average 0.0387% daily gain, more than double the 0.014% daily gain recorded in the Mercury direct days.
And from 1980-2013 we see just the reverse, Mercury direct days produced a 0.038% daily gain, double the 0.019% daily gain seen for the Mercury retrograde days in that period.

This excel table shows all the results of the Mercury direct and retrograde test:

mercury retrograde test

The conclusion is fairly simple. The recent 30 years show a negative effect for Mercury retrograde days, but when we study over 100 years of data no such effect is evident. In fact, from 1950-1980 the dreaded Mercury retrograde days performed much better than average.
This is actually consistent with the kind of results you would get from tossing a coin thousands of times. Over the long run you will get as many heads as tails, but for shorter periods of time you can and will get stretches where either heads or tails show up more than 50% of the time. This is no different from a gambler getting lucky (or unlucky) “runs” at a casino.

I also checked whether the market is more volatile during Mercury retrograde periods, as is believed by some, but found that the average volatility has been just the same as on the Mercury direct days.

Bottom line: there is no reliable edge in using Mercury retrograde for trading decisions. Belief that it affects stocks negatively is probably based on studying only the most recent 20 or 30 years of data. This shows how important it can be to look over longer periods. Something may seem to work for 10 or 20 years, but that can be due to normal statistical variations.

 

Good luck,
Danny

 

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Posted in Financial Astrology | Tagged: , , | 5 Comments »

 
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