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Moon
- Sun Finance: A New Paradigm? I
keep six honest serving men Rudyard
Kipling, The Elephant Child
Who?
Published work in this field is mainly limited to a few financial
astrologers, several technical analysts and a handful of academics from
the University of Michigan. I have published several Moon Sun papers
on my web site, while other web sites and references are listed for
those interested. Importantly, Yuan et al (2001) and Dichev & Troy
(2001) from the University of Michigan released two academic papers.
Both showed that there was a strong lunar phase effect in stock markets
worldwide. Markets tended to rise on a new moon and fall on a full moon
with statistical significance, a finding that could be used to trade
profitably. Yuan et al (2001) believed that investors moods varied
significantly at new and full moons, thus accounting for the variation
in stock market returns over the lunar month. To date these are the only
academics to publish comprehensive papers on a Moon - Sun effect in
financial markets. It is intriguing to consider what may be deciphered
following more detailed assessments of lunisolar cycles, not only lunar
phase. How? Moon
Sun cycles are believed to influence physiological cycles of a human
population, which induces changes in the mass mood. This is quite
plausible, as many studies have linked lunar phase with various human
physiological functions. The mass mood is believed to swing from the
extremes of optimism to pessimism, which show up in financial patterns
of prices and indices in tune with cycles of the Moon and Sun. Periods
of optimism and greed produce a rising market, while periods of
pessimism and fear induce a falling market. Crises and panics, the most
spectacular phase of the financial cycle, show up when there is a sudden
shift in sentiment from optimism to fear. According to this theory,
financial trends are activated by mass psychology and Moon Sun
cycles, which is completely at odds with the random walk efficient
market premise. Where? Activity in this area is mainly
confined to internet sites and papers presented in astrological and
technical analytical journals. Several books have also been published on
this topic. Mainstream academics and financial analysts have ignored the
lunisolar effect in financial markets and to date there have only been a
few academic papers published and no conferences held on Moon Sun
finance. This is only to be expected given the radial nature of the new
paradigm. How long Moon Sun finance remains obscure remains to be
seen. When?
Benner (1875) believed that eclipse cycles may have been the casual
basis of his famous pig iron price cycles, which were based on 9 years
and its regular deviations. This view that was very far-reaching and
insightful, considering it was made during the Victorian era 130 years
ago. McWhirther (1938) was first astrologer to note a lunisolar link
with the US business cycle. She believed that US economic activity
fluctuated quite regularly over the 18.6 year lunar nutation cycle.
However, it was only over the past two decades that Moon Sun finance
has gained a slow, but growing recognition in both academia and
technical analysis. Chris Carolan published his book The Spiral Calendar in 1992 and Welles Wilder promoted his Delta
Phenomenon during the 1990s. Both link lunisolar cycles with market
trends to produce their forecasting techniques. Over the past decade, I
had two books and numerous papers published on lunisolar market timing
and the 56 year panic cycle. These were the beginnings of Moon Sun
finance as we know it. The
Moon and Sun provide a sound scientific basis for technical analysis and
strongly supports those analysts, who consider past performance can give
a good indicator of future trends. There are reasonably regular market
patterns rather than randomness, as expected from traditional economic
theory. Previously, it has been very difficult to explain why the
markets and the economy moved in the observable cyclic patterns. Why do
millions of investors react in the same manner and at the same time? Why
did the Elliot Wave behave in accordance with Fibonacci numbers? Why is
the history of capitalism is littered with manias and panics over
thousands of years? Why do free market economies move in 50 to 60 year
cycles of growth and decline in accordance with the Kondratieff wave?
Overall, a simple, unified theory based on Moon Sun cycles may be on
the horizon to explain so many financial phenomena and provide vital
clues for the design of much needed follow up research.. Get used to
terms such as equinoxes, lunar risings, nutation, nodes, apogee,
ecliptical, diurnal, synodic and so forth. Acknowledgement.
Alas, the what, why & when approach was not original, but was
adapted from Pruden (1996). Web Sites References |