“Theirs not to reason why, theirs but to do and die”: said Lord Tennyson in The Charge of the Light Brigade.
Having some fun with Lunar cycles: mine is not to reason why but to enlighten – do or die. Today we revisited a simple and often silly concept of Lunar Moon phases correlating with various market price movements. Perhaps in the eye of the beholder, yet it’s interesting when virtually any commodity or publicly traded marketplace is lined up with New and Full Moons during a particularly volatile price action pattern. The dates often line up with some regularity. We wouldn’t rely on such celestial connections for a trading model to invest ones precious capital. Yet it’s interesting, at times, how often short term market reversals begin near these lunar dates as we show in the randomly selected charts below for Gold, SP 500 Stock Index and Corn.
In this Gold chart we also added a much more important measure of extreme sentiment for overbought and oversold commitment of traders (COT). The COT represents real money flows that we find useful indicating a period when prices should reverse trend as managed money, hedge funds and commercial traders rebalance.
COT is often highlighted in our forecasts and we will review a full compliment of the markets in coming days for such extreme COT positions and what they indicate. The Lunar inflection points may have little merit and certainly encompass very short term fluctuations, but often it’s more than amusing how often clear high and low price points correlate with new and full moons. We will continue to share more substantive models and forecasts with readers, but we thought we would share the Lunacy of moons and markets today.
Meanwhile the world is awaiting 2 things as they have been all year: Greece and the Fed. Greece is less important, but that Tragedy should hopefully resolve soon with a major strings attached bailout or what everyone now expects – a debt default. Interestingly the Euro has rallied during the Greek debt collapse escalation even though lower Euro interest rates are expected during such a default. Lower rates usually coincide with a weaker currency. The more important soap opera is the US Federal Reserve. A strong US economy will scare the stock market due to sooner than anticipated rate hikes. A weaker economy will keep corporate earnings weak, but jubilantly postpone the long awaited interest rate tightening cycle. So we muddle along with weak earnings and a 6th year of a weak economy that hasn’t yet cleared the 2008-2009 recession from its memory. Still waiting for Greece and our Federal Reserve to take bold action!