The year of Mars and of the Ox in Chinese astrology: what to expect for the stock markets in 2009? (2/2009)
In this article I want to present a little empirical study that examines the performance of these 3 cycles in terms of Dow Jones data of the past 100+ years and suggest some future projections:
1. decennial cycle (10 years): derived from the last digit of the year
2. planetary cycle (7 years): each year is ruled by one of the 7 classical planets (Sun, Moon, Mercury, Venus, Mars, Jupiter, and Saturn)
3. Chinese year cycle (12 years): each year is ruled by one of the 12 Chinese signs
1. decennial cycle (10 years): amplitude around 35%
The decennial cycle is the best-known cycle. As a matter of fact there are huge differences in the average performance of a year: ranging from almost +30% in a '5'-year (such as 2005, 1995) to a loss of more than -5% in '0'-years (such as 2000), which translates into an amplitude of some 35% (chart from Alan Newman 1881-2007, N=127). In contrast, the 4-year election cycle has an amplitude of 6%, so it's more or less useless.
It is fully confirmed that numerology is by far most important & usually dwarfs astrological cycles. You may speculate about the background of this cycle. One reason could be that the Jewish calendar for most of the year has the same last digit as the Gregorian calendar (the Jewish New Year in September is Rosh Hashanah http://en.wikipedia.org/wiki/Rosh_Hashanah). The Jewish religion is very numerologically oriented. Especially ahead of the holy '7'-year (the number 7 is by far the most often cited in bible, almost 1000 times) one shall remain 'pure', also in the sense of being unpropertied (or ascetic). A well-known cycle is the jubilee year every 7 x 7 = 49 years, where the financial system should be reset, so to say. A confirmation is that the '8'-year is the 2nd best, the religious folks can buy again... 9/30/2008 marked the beginning of the the year 5769, and 5770 started on 9/19/09. 5770 is quite interesting because it contains the holy 7 twice. The 0-years do have a special meaning, too.
2. planetary cycle (length: 7 years): amplitude 23%
According to Chaldean astrology, each year is ruled by one of the 7 visible planets, 2009 is the year of Mars:
- 2003 Sun
- 2004 Venus
- 2005 Mercury
- 2006 Moon
- 2007 Saturn
- 2008 Jupiter
- 2009 Mars
As the diagram below shows (N=105), a remarkable imbalance between the different years can be observed:
The Sun year sticks out like a sore thumb with an average gain of 22%, and 87% of all solar years are closing in positive territory. The Moon still resulted in an average plus of +17%, with 73% positive years. On the other side, Mars years were just 40% positive, and Venus, Jupiter, and Saturn years were only resulting in weak gains of up to 2.6%. The Jupiter year even resulted in an average loss of -1.5%.
% performance/ year
% positive years
How can that be interpreted in the light of astrology? The very positive influence of the Sun is well-known at least since the extensive analysis of 26 stock exchanges around the globe by professor David Hirshleifer from the University of California at Irvine: the annualized rise on sunny days is 25% and just 9% if the weather cloudy (http://www.nypost.com/seven/12042007/business/sunny_days_shine_on_marts__study_702090.htm). The sun stands for good mood and thus for optimism and rising markets. The Moon is the sun of the night and rules the sign Cancer which is, according to different empirical studies, associated with success and growth. Sun and Moon alone account for three quarters of all profits of all 7 years.
Mercury is mediocre, the nature of Mercury is to mediate, Wednesday is the day of Mercury (in French it's 'Mercredi'). Each of the 7 days of the week is named after a planet.
It's no surprise Mars and Saturn as the classic malefics are bearish. We had 11 bear market lows since 1962: 10/1966, 5/1970, 12/1974, 3/1980, 8/1982, 10/1987, 10/1990, 12/1994 (USA) - 3/1995 (Europe), 10/1998, 10/2002 (USA) - 3/2003 (Europe), 3/2009. Interestingly, the 6 Mars years since 1962 explain 8 of the 11 bear market lows in this time frame. With the exception of 1981, the Mars year or the quarter before always nailed the low. Most bear market lows are ending in fall:
- Mars year 2009 -> bear market bottom 3/2009
- Mars year 2002 -> bear market bottom 10/2002
- Mars year 1995 -> bear market bottom 12/1994 (USA) - 3/1995 (Europe)
- Mars year 1988 -> bear market bottom 10/1987
- Mars year 1981 -> bear market bottom 3/1980 (bear market bottom 8/1982)
- Mars year 1974 -> bear market bottom 12/1974
- Mars year 1967 -> bear market bottom 10/1966
Before 1962 the pattern worked, too, although the Mars year not always marked the end of a full bear market (20-30% decline) but twice only a decline of 14-15%:
- Mars year 1960 -> low 9/1960 (decline -15%)
- Mars year 1953 -> low 9/1953 (decline -14%)
- Mars year 1946 -> bear market bottom10/1946
- Mars year 1939 -> bear market bottom 9/1939
- Mars year 1932 -> bear market bottom 7/1932
According to the Mars cycle, the 4th quarter 2008 and the year 2009 should mark a bear market low, the 11/21/2008 low in the US resp. the January 2009 bottom in Europe (EuroStoxx) do already fit the pattern (the 2nd natural focus would be fall 2009). Mars is the planet of war and sharp moves, so theory and expectation do fit will very well because the sharpest moves in the stock markets are almost always in the very last stage of a bear market and the very first stage of a bull market.
However, the traditional Jupiter and Venus performing so bad is hardly explainable and not in accordance with astrological theory.
3. Chinese zodiac cycle (length: 12 years): amplitude 22%
The Chinese years (N=108) are also distributed very unevenly (pictures from http://www.chinaseite.de/china-kultur/chinesische-astrologie/chinesisches-horoskop/chinesische-tierkreiszeichen.html):
Is that in accordance with theory? Yes quite well:
- #1 rabbit (element: wood): The rabbit is breeding fastest of all 12 animals, it is a universal fertility symbol.
- #2 pig (element: water): The pig has a very positive meaning, too, in Europe a New Year gift that should bring good luck is a small pig (made of chocolate or plastic, for instance). Another symbol representing luck is the fly agaric, which is called „amanita muscaria" In Latin and the origin of the name "Amanita Market Forecasting".
- #3 dragon (element: wood): In China the dragon is a symbol for luck similar to the pig in the West. Dragon years are considered to be beneficial for marriages and births in China.
It's no coincidence that the 3 weakest signs are the 3 fire signs: sheep, horse, and snake. Fire is destructive in Chinese tradition. Good times are stabilizing a situation while bad times are catalysts of change, change & transformation are another meaning of the element fire. At the very bottom of the hierarchy is the snake: of the 12 animals, the snake is the least liked and most feared, as well as bear markets and bad times. On the other hand, 2 of the 3 best signs (rabbit and dragon) belong to the element wood which stands for dynamic rise and growth.
It's interesting that each of the 4 elements represents a season: water = winter, wood = spring, fire = summer, metal = fall. Of the 4 seasons, summer (= fire) is the worst performing in the stock markets. Summer ends around 9/23 and late September also marks the average (statistical) bottom of the Dow Jones. Because the symbolic meaning and the empirical findings align well, the thousands of years old Chinese system is supported.
average profit (%)
Deriving a simple model
With an amplitude (difference between the best and worst year) of 22-23% the 12-year Chinese cycle and the 7-year planetary cycle are clearly weaker than the 10-year decade cycle (amplitude 35%).
Because N=15 for a planetary year is much larger than N=9 per Chinese year, the planetary cycle is much larger and weighted higher. The larger N, the smaller the statistical variation is on average, still statistical variance is much larger in the planetary cycle.
Unfortunately, this simple model (presented first in early 2009) only allows a crystal-clear message for 2014 where all 3 factors are in the bearish camp. 2011 (bearish) and 2012 (bullish) have a visible but weak tendency. The next two years (2009, 2010) as well as 2013 are too contradictory in order to derive a reliable tendency. Models should primarily used when they have a clear direction but forget them when the message is mixed. The years in detail:
- 2009: no direction (average, mixed)
1 '9' year: rather strong, above average (#3 of 10)
2. Mars year: rather weak (#5 of 7)
3. Ox year: +5% average or rather weak (#7 of 12)
- 2010: no clear direction (average, mixed)
1. '0' year: the weakest year of all (#10 of 10)
2. Sun year: by far the best year of all (#1 of 7)
3. Tiger year: +2% rather weak (#9 of 12)
- 2011: not clear but rather bearish
1. '1' year: rather weak (#8 of 10)
2. Venus year: very weak (#6 of 7)
3. Rabbit year: +22%, by far the best year (#1 of 12)
- 2012: rather bullish
1. '2' year: average to below average (#7 of 10)
2. Mercury year: average to above average (#3 of 7)
3. Dragon year: good year (#3 of 12)
- 2013: no direction (mixed, average)
1. '3' year: average (#5 of 10)
2. Moon year: very good (#2 of 7)
3. Snake year: the worst year of all (#12 of 12)
- 2014: bearish
1. '4' year: average (#4 of 10)
2. Saturn year: average to weak (#4 of 7)
3. Horse year: the 2nd worst year of all (#11 of 12)
- 2015: no clear statement (presumably mixed)
1. '5' year: best year (#1 of 10)
2. Jupiter year: worst of all (#7 of 7)
3. goat year: weak (#10 of 12)
- 2016: clearly bearish, bear market bottom?
1. '6' year: below average (#7 of 10)
2. Mars year: rather weak (#5 of 7), bear market bottom?
3. monkey year: weak (#10 of 12)
- 2017: no clear message (presumably mixed)
1. '7' year: bearish (#9 of 10)
2. sun year: very bullish (#1 of 10)
3. rooster year: average to somewhat bullish (#4 of 12)
- 2018: no clear message (presumably mixed)
1. '8' year: bullish (#2 of 10)
2. Venus year: bearish (#6 of 7)
3. dog year: average (#5 of 12)
- 2019: crystal-clear bull market year
- 1. '9' year: bullish (#3 of 10)
2. Mercury year: somewhat bullish (#3 of 7)
3. pig year: bullish (#2 of 12)
Thanks to Chris Wainwright for the calculations.