Tomorrow is a new moon so I thought this would be an appropriate post.
When I first heard of market astrophysics in one of the Market Wizard books I was very skeptical and didn’t really look much further into it. It sounded too much like astrology or using crystals and tarot cards to read markets. Then came the study by the Atlanta Federal Reserve Bank entitled, Playing the Field: Geomagnetic Storms and the Stock Market, which concluded that during high periods of electromagnetic storms stocks seemed to under perform, while during low periods small cap stocks out performed.
More recently there was a study done by the Royal Bank of Scotland that said if you’d bought the S&P index on a new moon and sold on a full moon from 1928 to 2010 £1,000 would have turned into £1,502,689, compared to £63,846 by just using a buy and hold strategy.
This peaked my curiosity and made me wonder whether lunar cycles or other forms of market astrophysics had any affect on the forex markets. Below is a chart with the new moon marked in yellow and the full moon marked in red. The blue lines are quarter moon phases. As you can see the moon cycle calls turning points within a day or two quite nicely. Some of these are intermediate turning points, while others are actual tops and bottoms. Although it’s not perfect it works about 60-70% of the time. Although you couldn’t trade this strategy by itself, in conjunction with other tools such as cycle analysis, technical analysis and seasonal analysis it can be quite powerful.
Besides the lunar cycle analysis there are other tools in market astrophysics such as the Ephemeris which can predict turning points in the market on an intraday basis, by looking at the movement of planetary bodies.
