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 cycleA cycle is a recurring event in the marketss in terms of Dow Jones data of the past 100+ years and suggest some future projections:
1. decennial cycleA cycle is a recurring event in the markets (10 years): derived from the last digit of the year
2. planetary cycleA cycle is a recurring event in the markets (7 years): each year is ruled by one of the 7 classical planets (Sun, moonThe moon has a major impact on the markets, the full moon is more important than the new moon., Mercury, Venus, Mars, Jupiter, and Saturn)
3. Chinese year cycleA cycle is a recurring event in the markets (12 years): each year is ruled by one of the 12 Chinese signs

1. decennial cycleA cycle is a recurring event in the markets (10 years): amplitude around 35%
 The decennial cycleA cycle is a recurring event in the markets is the best-known cycleA cycle is a recurring event in the markets. 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 cycleA cycle is a recurring event in the markets has an amplitude of 6%, so it's more or less useless.

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It is fully confirmed that numerology is by far most important & usually dwarfs astrological cycleA cycle is a recurring event in the marketss. You may speculate about the background of this cycleA cycle is a recurring event in the markets. 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 cycleA cycle is a recurring event in the markets 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 cycleA cycle is a recurring event in the markets (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:

As the diagram below shows (N=105), a remarkable imbalance between the different years can be observed:

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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 moonThe moon has a major impact on the markets, the full moon is more important than the new 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%.

 

planet

% performance/ year

% positive years

 next occurrence

1

Sun

21.6

87%

 2010

2

moonThe moon has a major impact on the markets, the full moon is more important than the new moon.

16.8

73%

 2013

3

Mercury

7.1

73%

 2012

4

Saturn

2.6

60%

 2014

5

Mars

2.2

40%

 2009

6

Venus

1.6

53%

 2011

7

Jupiter

-1.5

53%

 2015

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 moonThe moon has a major impact on the markets, the full moon is more important than the new 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 moonThe moon has a major impact on the markets, the full moon is more important than the new 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:

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%:

According to the Mars cycleA cycle is a recurring event in the markets, 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 cycleA cycle is a recurring event in the markets (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):

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Is that in accordance with theory? Yes quite well:

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.

 

sign

element

average profit (%)

next occurrence

1

RABBIT

wood

21.7

2011

2

PIG

water

13.5

2019

3

DRAGON

water

12.0

2012

4

ROOSTER

metal

10.5

2017

5

DOG

metal

8.5

2018

6

RAT

water

5.5

2020

7

OX

water

5.0

2009

8

MONKEY

metal

3.9

2016

9

TIGER

wood

2.3

2010

10

SHEEP

fire

1.5

2015

11

HORSE

fire

0.0

2014

12

SNAKE

fire

-0.4

2013

Deriving a simple model
With an amplitude (difference between the best and worst year) of 22-23% the 12-year Chinese cycleA cycle is a recurring event in the markets and the 7-year planetary cycleA cycle is a recurring event in the markets are clearly weaker than the 10-year decade cycleA cycle is a recurring event in the markets (amplitude 35%).

I'd like to suggest a simple model, with 3 factors ranked in order of importance:
1. decennial cycleA cycle is a recurring event in the markets amplitude 35%
2. planetary cycleA cycle is a recurring event in the markets amplitude 23%
3. Chinese cycleA cycle is a recurring event in the markets amplitude 22%

Because N=15 for a planetary year is much larger than N=9 per Chinese year, the planetary cycleA cycle is a recurring event in the markets 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 cycleA cycle is a recurring event in the markets.

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:

Thanks to Chris Wainwright for the calculations.