“There is a tide in the affairs of men. Which, taken at the flood, leads on to fortune…” (Shakespeare’s Julius Caesar Act-IV, Scene-III)
There is much meaning in the above quote. Brutus appears to say that by understanding society’s motivations and thus spotting an early trend, one can participate to the degree that one can become quite wealthy. We, as traders, must do so daily. We must know when the tides are coming in and going out for the markets we trade, whether we are day trading, swing trading, or long pull investing.
Much like the lunar pull of the tides on the ocean, the moon appears to affect the markets. There is the well-known full moon and new moon cycle, but there are two lesser-known moon cycles. Those would be the apogee/perigee cycle and the declination cycle.
In the apogee/perigee cycle, the moon cycles in such a manner that at perigee, the moon is much closer to the earth than at any other time during the month (gravitational pull is highest), and at apogee, it is the farthest point in its cycle from the earth (gravitational pull is lowest). When closest to the world, the moon moves its position at a much higher velocity than when the moon is at apogee. In the declination cycle, the moon moves above and below the ecliptic plane (the midpoint between earth and sun).
This past Tuesday, the moon reached maximum south declination in its cyclical journey above and below the ecliptic plane. And a “Super Moon” occurred on Wednesday, a full moon at perigee (Big and Bright). We take note when all three cycles described above line up like this. It portends a potential pivot point in markets, as the tides of investor and trader sentiment sometimes have coincident reversals.
In 2010, the Royal Bank of Scotland published some esoteric research on this subject matter. It can be easily found on the internet. The title is “Sheer Lunacy Staring at the Heavens.” It speaks to the full moon / new moon cycle and the effect on the stock market in much greater detail and with interesting data and graphs.
Last week after covering our 60-Year Master Cycle, we stated that we would cover the 40-year and 20-year cycles this week. But first, a review of the 60-year Master Cycle and our focus on the year 1962. So far, the 2022 low in the S&P 500 was on June 17 at 3636.87, about a week earlier than in 1962, which was June 25, the low of that year was 51.35. So far, the 1962 analog is working, so we will stick with it.
As to the 40-year cycle (1982 analog), the S&P500 index low occurred on August 9 at 102.2. Subsequently, the market had a massive rally from the low, printing a high for the year on November 10 at 144.36 (a week after the 1982 mid-terms, both the Senate and House held for the Democrats, assuring a divided government). Fundamentally, the market appeared to believe that Fed Chair Paul Volker had succeeded in breaking the back of the long-term inflationary pressures plaguing the economy.
In 2002, the 20-year cycle, the S&P500 found a low for the year on July 24 at 775.68. The index rallied to a high on August 23 at 962.7, a 24% gain in one month. Afterward, the market gave ground for a higher low to take place on October 10 at 768.63. On October 9, the DJIA found its low for the Dot-Com bear market below 7200. Fundamentally, there was a significant bankruptcy of the giant telecom conglomerate WorldCom on July 21 and the bankruptcy of US Airways on August 12.
On an ending note, the never-ending cycle of capital flows: Bull market tops tend to exhibit highly consequential and large mergers and acquisitions (the money is burning a hole in the proverbial pocket). In contrast, bear market bottoms tend to show massive bankruptcies and restructurings.
Trade well and stay safe. JHS
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