Bad Moon Rising? US stocks fall on trade worries

(24 June 2018)  As the old song goes, there could be a "Bad Moon Rising" this week.   We are due for a Full Moon this week just after midnight EDT, Thursday June 28th.  The Full Moon will rise Wednesday night/Thursday morning in the US, but it seems more likely that stocks will fall.  That's because the Full Moon has been living up to its bearish reputation in financial astrology here in 2018 as each Full Moon has coincided with significant declines. 

There have been several statistical studies that have shown a correlation between the Full Moon and declining stock prices.  These studies have shown that the period a week before and after the Full Moon have lower returns on average compared with the two-week window around the New Moon.  The days immediately before and after the Full Moon are generally more bearish while the time around the New Moon are bullish.  While this correlation clearly doesn't hold during each lunar phase sequence, it seems true over time. 

We can see that this relationship has been manifesting very clearly during this correction over the past six months.  The Full Moon of January 31 marked the beginning of the first and deepest decline in the correction with stocks bottoming out about one week later.  The Full Moon of March 1 almost exactly matched an interim low in the market (the low was on March 2) after which stocks rebounded.  

The next Full Moon was March 31 and also marked a significant pullback as stocks made a low just two days later on April 2.  The Full Moon of April 29 also came during a down trend as stocks bottomed five days later on May 3.  The most recent Full Moon occurred on May 29 and marked the exact date of an interim low in the stock market.

Not only have stocks generally fallen during that 15-day window surrounding the Full Moon, but very often the day of the Full Moon has marked an approximate bottom in the stock market after which sentiment improved and stocks rose again.

So will this happen again this week?  It's very possible.  Stocks have already been falling in the US last week as we entered the bearish 15-day Full Moon window late in the week.  We should make special note of the fact that the midweek Full Moon looks even more bearish than normal.  The Moon (12 Sagittarius) will conjoin Saturn (11 Sagittarius) and align with Rahu (North Lunar Node) at 12 Capricorn.  Saturn is a bearish planet, of course, so the fact that the Full Moon could derive some additional negative influence from Saturn suggests two things to me: 1) a higher than normal probability of a decline this week and 2) a higher possibility of a large decline (e.g. >2%). 

This Full Moon period of elevated risk could well extend into early next week as Mercury follows suit on Monday, July 2nd and aligns with bearish Saturn and bearish Rahu.   The standard bearish 15-day Full Moon window is due to end July 4th.

For more details and analysis on market trends for this week, this month and this year, please check out my weekly MVA Investor Newsletter.  The newsletter is published every Saturday and includes extended discussion of US and Indian stock markets, as well as gold, oil and major currencies.