ASTROLOGY AND THE MARKETS
Editor,
It was a pleasure to read Arthur Merrill's letter in the December 2000 issue regarding his study of the relationship between full moons and the Dow Jones Industrial Averages (DJIA). I have great regard for Merrill's work, and I still treasure an autographed copy of his classic Filtered Waves, Basic Theory.
First, if one really wants to know whether there is a correlation between astrology and financial markets, then one must attempt to understand the nature of astrology. It is not a study that lends itself well to empirical science or statistics, which will almost immediately cause a skeptic to assume that the method is of little value.
Merrill concurs with Brooks Rimes, who questioned the place of astrology in technical analysis in a prior letter. He states that he tries to keep an open mind to the subject, but to date has seen no evidence that demonstrates the validity of astrology as a market analysis tool. As one of the pioneers in this field, I would like to comment.
Merrill's full-moon study concurs with quantitative studies I have conducted on solar and lunar eclipses, which are considered even more potent to most proponents of astrology than full moons (The International Astrologer Journal, Spring 1998, Volume XXVII, No. 2). Again, there is no evidence of a statistical correlation to crests, troughs, or price direction in the DJIA when plotted anywhere from zero to five days to either side of either eclipse. The results did not disturb me, for I had observed as much over the past 20 years. However, I was concerned because so many financial astrologers frequently claimed that there was a correlation and implied that it was one of the most important astrological indicators, yet they never cited evidence or even anecdotal examples to back up these claims.
Here is where knowledge of astrology can be invaluable to one who wants to determine whether there is any correlation to financial markets. Most astrologers understand that lunar cycles are relatively mild in their correlation to cycles of human activity in comparison to planetary cycles. Yet most academic researchers try to prove or disprove astrology (especially in financial markets) through statistical studies involving new or full moons.
A new moon is simply a moment in time where the moon and sun appear to be in alignment, as seen from the Earth. It occurs about every 29 days. It is not a rare event. Likewise, a full moon occurs approximately every 29 days, when the sun and moon are on opposite sides of the Earth. Yet planets appear together or in opposition to one another too, and far less frequently, which would seem to be a more intriguing basis for a study than something so transitory as the moon in its orbit around the Earth.
My own quantitative studies on these astronomical events, as published in several books, suggest a far stronger correlation to financial markets than either new or full moons, or solar or lunar eclipses. I would be more than happy to send Arthur Merrill a copy of these published studies related to gold, silver, or US stock market indices if he were interested.
The problem with doing any kind of statistical study to validate astrology lies in the mechanics of both astrology and market activity. For instance, specific astrological signatures rarely correlate with only a crest or a trough in a given financial market. The theory behind astrology is that it marks a change in collective psychology or investor sentiment. For example, in one instance, a sun opposite Jupiter (which occurs about once every 13 months) might correspond to a multi-month crest in US stocks, but in the next instance, it might correlate to a multi-month trough. The point is that certain astrological signatures (but not all) have a correlation to market reversals, or a change in investor sentiment. How long that change will last depends upon a multitude of other factors, both astrological and mundane, such as the technical or cyclical condition of the market.
The matter is compounded by the fact that single astrological signatures rarely occur. They are often present with other signatures that occur nearby in time. For instance, the sun may oppose Jupiter every 13 months. But in one year, Mars may conjunct Uranus two days earlier, and in another year, Venus may conjunct Mars one day later. In another year, both of these signatures (or others) may occur within the same week, while in yet another year, no other significant signatures occur nearby. Merrill might find the same thing even in his full-moon study. That is, those full-moon dates in which stocks seem to respond sharply may have coincided with periods in which other geocosmic signatures were occurring within a day or two.
By the way, I noticed that Merrill's study cites 60 full moons between 1992 and 1999. Since there are 13 full moons per year, this suggests about 30 instances are missing. Was this perhaps due to the fact that he did not consider full moons that occurred over weekends? Just a question in the spirit of research, as I don't think the results would have changed significantly anyway, due to my belief that lunations have very little correspondence to trend changes in US stock indices.
The mechanics of financial market prices also present challenges to a proper statistics study. Let's say one wishes to analyze the dates from which 4% or greater filtered waves are defined (to use one of Merrill's technical tools, which I use to conduct studies relating astrology to financial markets). Let's say there is a crest from which prices decline more than 4%. However, before the greater part of that decline commences, the market trades for a week or so in congestion, forming a double top one week later. The second crest is just a tick below the first crest. Which crest do you use? The first one, which records the actual high tick, or the second one, which commenced the more severe decline? In attempting any kind of statistical research involving any market timing indicator (that is essentially what astrology is), one has to define a variety of criteria to be used in order to create results that are useful to actual traders or investors.
I would like to thank Arthur Merrill -- and Brooks Rimes -- for opening up this discussion on astrology and financial markets. Unlike so many authorities on financial markets, Merrill at least tries to keep an open mind on the subject. That is greatly appreciated by serious market students like myself. Most scientific people tend not to give any credence to astrology for only one illogical, unscientific reason: it shouldn't work, therefore it doesn't work.
Raymond Merriman, CTA, CAP
Editor, The MMA Cycles Report
West Bloomfield, MI
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