US stocks hit new highs on New Moon

(12 July 2018) This year it's all about the Moon it seems.  Financial markets have been under significant pressure in 2018 from rising interest rates in the US and the imminent threat of Trump's trade wars.  But it has been the Moon that has had the final say.  Since the beginning of the stock market correction in January, stocks have risen and fallen in sync with the phases of the Moon. 

As I suggested in a previous post on the effect of the Full Moon, stocks have generally made significant lows around the time of the Full Moon.  Conversely, stocks have made interim highs right around the time of the New Moon.  This cycle has been more pronounced in US and European markets.  Since the lunar cycle lasts about 29-30 days, we have seen a repeating pattern of stocks rising for about two weeks into the New Moon and then falling into the Full Moon.

There has been solid statistical research on the effects of lunar phases on stock prices which bears out this pattern across many cases.  It is an empirical reality that cannot be easily dismissed, although the possibility of a self-fulfilling prophecy always exists.  But why it should be so pronounced and so obvious this year is harder to say.  I know that each time stocks pulled back around the Full Moon, there were also corresponding bearish planetary alignments.  The twin effects of the bearish Full Moon and different negative alignments likely exacerbated the usual lunar cycle.  Positive alignments have conversely tended to occur leading up to the time of New Moons.

And so we find ourselves on the eve of another New Moon tonight just before midnight EDT 12 July 2018.  Actually, this New Moon is also a partial solar eclipse so that could introduce some added tension to the mix. To be honest, I don't think that eclipses are all that bad.  While they have been traditionally regarded with dread and fear, their impact on financial markets is quite mixed.  Many eclipses have no effect at all, and some eclipses have been positively bullish for stock markets.  As a single variable, therefore, eclipses are not reliable predictors of any particular financial or political outcome.   Of course, not all eclipses are created equal.  Some solar eclipses -- and New Moons -- are more benefic than others due to the particular alignment of the other planets.  But that is a more detailed analysis best left for another day.

So will stocks swoon once again in the coming days after the New Moon?  I think it's quite likely.  Eventually, I would expect this lunar phase correlation will weaken with time but maybe not just yet.  The key co-factor is the other planetary alignments at the time of the New Moon.  As the chart below shows, there is a celestial tug of war of sorts between bullish Jupiter and Neptune and bearish Saturn and the North and South Lunar Nodes, Rahu and Ketu.  Jupiter just stationed direct on Tuesday and thus there was another reason for stocks to rise this week in addition to the approach of the bullish New Moon. And with Jupiter now slowing moving towards its 120 degree aspect with Neptune, there could be more optimistic  sentiment available to push stocks higher later this summer.  

However, the Saturn-Rahu/Ketu alignment is made worse by Mars.  Mars is retrograde and it is currently approaching its conjunction with the South Lunar Node, Ketu.  Weighing the respective effects of these off-setting energies is not straightforward but certainly we should acknowledge there is added risk in the days ahead.  And since we are now approaching the bearish Full Moon (and lunar eclipse) on July 27th , there is another reason to think that stocks will continue adhere to its pattern in the near term and tend to decline for the rest of this month.

So when might stocks start to fall?  Today saw the NASDAQ hit a new all-time high while the S&P 500 made an important new interim high.  As we can see from the price chart, the New Moon doesn't mark the exact days of interim highs.  In June, the New Moon occurred two days after the high while in May stocks made an interim high four days after the New Moon.  And April's New Moon occurred two days before the interim high for that month.

So there could be a grace period of a few days here before the next move lower begins.  I would nonetheless expect stocks to start to fall next week at some point.   For more details and possible market scenarios, check out my weekly investor newsletter.  I cover US and Indian stock markets, as well as short, medium and long term trends in gold, oil, and major currencies.