New Moons and the Stock Market

I’ve just been sent a 2009 statistical study which shows that the various US Stock Market Indices – Dow Jones, Nasdaq etc – are on average higher after a New Moon than you would expect. In the case of the Dow Jones, the index was found to have been on average about 50 points higher.

The study was based on enough samples to make this statistically significant. But standing at only about ½% of the value of the shares (if we say the Dow is at 10000), it wouldn’t seem to me to be worth buying before the New Moon and selling just after it, because all your commissions and taxes would more than wipe out any gain you had made.

On the other hand, if you are making a longer term investment, it would seem to make sense to buy the day before the New Moon, because you would, on average, see an immediate ½% gain in the value of your shares. Also, wait to sell until the end of the next New Moon day, which is likely to be a short-term high.

A New Moon is a time of beginnings, a time of confidence and optimism, and this gives an astrological explanation for the phenomenon. It is well known that if you are planting something, it is best to do so while the Moon is growing; and if you are harvesting, do so after the ripeness of the Full Moon.

Some New Moons, I would have thought, would be better than others for investing, depending on the sign the Moon is in. The study does not use signs, and I don’t blame them, because any pretence of scientific method at that point goes out of the window. This is because the signs are not astronomically observable phenomena. For a start, they are each divided into a neat 30 degrees, and since they were formalised a couple of thousand years ago they have all shifted along the ecliptic by about 23 degrees.

For some reason, though, the signs work. My response to this on Tuesdays, Thursdays and Saturdays is to think that astrology is hokum; on the other days of the week, my response is a guarded realisation that the universe is not ultimately ruled by human logic.

Anyway, it would be interesting to see how a New Moon in Taurus, the sign of money, fares under such a study. (Vince Cable, the LibDem Shadow Chancellor, is a Taurus; George Osborne, the Tory Shadow Chancellor, has Moon, Mercury and Venus in Taurus; Robert Peston, the BBC business editor, was born on a New Moon in Taurus). The New Moon in Sag, however, is probably the one to go for. Sag swings from wild optimism to equally wild pessimism, so depending on the mood of the market, do your buying or selling the day before. The New Moon in Fire generally is likely to exhibit confidence. The New Moon in Capricorn is likely to be based on realism rather than mood, so don’t expect any gratuitous rises here. For the less scrupulous, if you want to start a rumour that will affect share prices, do it on the New Moon in Gemini! By the same token, beware the New Moon in Gemini!

Much of the statistical study I’ve quoted from is Aspergers only. It starts off, however, in a readable fashion:

Since ancient times entire civilisations have associated the lunar phases with specific human behaviours. Extensive research has been conducted over the years to see if there are any significant changes in human behaviour during lunar phases. As written by Paracelsus in the 16th century “mania has the following symptoms: frantic behaviour, unreasonableness, constant restlessness and mischievousness. Some patients suffer from it depending on the phases of the Moon.” More recently Lieber and Sherin reported homicides over 15 years from 1956-1970 given the lunar phase, and found it to be statistically significant peaking at times of a Full Moon and a secondary peak at periods just after the New Moon phase. If the Moon phases do affect human behaviour, can it also be said that they affect US financial markets? Id investors do react based on the lunar phases, it would be a complete violation of the Efficient Market Hypothesis, which states that all financial instruments reflect perfect information when being bought and sold. (more…)

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