Tools: Moon Phases

"We know that the moon's effect on our planet is great--it is vitally connected with the movement of all fluids.  The moon is also believed to effect human behavior in strange ways, especially during a new or full moon.

"In an experiment conducted on an arbitrary set of commodities for the year 1972 (Todd Lofton, July 1974, writes about his observations) it was shown that short-term movements of prices react with some uniformity with respect to the phases of the moon.  In fact, the commodities chosen for observation--silver, wheat, cattle, cocoa, and sugar--showed an uncanny ability to form a rising market following a full moon and a falling market after a new moon."  -Commodity Trading Systems and Methods, P.J. Kaufman, p. 205.

That last statement, "a rising market following a full moon and a falling market after a new moon", intrigues me.  I wondered whether it is true or false, of value or worthless nonsense.  Fourteen years ago as I would travel back and forth between Boise, Idaho, and Salt Lake City, Utah, one of my customers lived near the highway at the half way point of the trip.  Several times I stopped in and visited with him.   He owned several large farms in southern Idaho and traded sizeable positions in live cattle futures.  His office had large custom made chart tables where his secretary would manually update daily bar charts on three feet by four feet graph paper.  The reason I mention this customer is because his charts were marked with symbols for the moon phases.  I have great respect for this trader because he has been trading for a long time, trades big positions, and takes trading seriously.  I wish now I had paid more attention to how he used the moon phases that he marked on his charts.

Anyway, I can't do research unless I have tools to work with.  So, moon phases were added to the Cycles tool in Ensign Windows.  The moon phase parameter is simply a check box to indicate the moon symbols are to be shown on the chart.

The first two Show options are used to display cycle arcs on the chart.  For this research, I am only interested in having Moon Phases shown on the chart.  I selected a dark gray color for the new moon image.  Full moons will always be shown in white.  I did not go hunt down the perfect example.  I am simply using a current daily Feb Live Cattle chart as my example since cattle was mentioned in the Kaufman book, and my customer puts moon phases on his manually drawn cattle charts.  Here is the LC1G cattle chart showing moon phase symbols.  (Some moon phases occur on weekends and holidays.  In that case, the moon symbol is shown on the nearest trading date.)

Cattle have been in a strong up trend since their $70.050 low on September 13th, 2000, which happens to be a Full Moon date!  This low turning point is not shown in the example.

Let's rate the correlation in the chart for the week following the new moons and the full moons.  I will include the net change of the moon day as the first of 6 trading days.   The theory is "a rising market following a full moon and a falling market after a new moon".  So, how well does this cattle chart correlate with the theory?

Full Moons (expect rising market

• Nov 10th, 2000.  Excellent  - This day was a low turning point followed by a $1.325 gain.
• Dec 11th, 2000.  Excellent - This day was followed by a $1.15 gain in 6 days.
• Jan 9th, 2001.  Superior - This day was a low turning point.  The huge 6-day gain is $4.025.

New Moons (expect falling market)

• Oct 27th, 2000.  Poor - Not too bad until the strong up day on Nov 3rd for an up move of $0.825.
• Nov 24th, 2000. Excellent - Rare correction in this strong up trend.  Down move was $1.225.
• Dec 26th, 2000.  Good - Down move in 6 days is $0.425.  However, better down move followed.
• Jan 23rd, 2001.  Excellent - 6 day down move is $2.45.  The Jan 30th close, not shown, was $77.625.

Summary
I would give the theory pretty high marks for correlation on the current LC1G chart.  The low turning points on the full moon dates of Nov 10th and Jan 9th jump out.  The high turning point on the new moon date of Nov 24th jumps out.  The correlation of the other new and full moons is pretty good as well.  And to top it off, the annual low occurred on a full moon on September 13th, 2000!  My personal conclusion is that there is value in the theory that the moon influences human behavior.

Tip:   Pay attention to the phase of the moon.

As a result of this research, my brother has added the moon phase as another input to his personal cattle market neural net forecasts.  You are encouraged to do you own research and arrive at your own conclusions.  The material presented here has been limited to the examination of one cattle chart for seven recent moon phase dates.  Thorough research should involve evaluating lots of charts and lots of moon dates.

This daily chart of the e-mini shows high correlation with the moon in 2002.  The bars are colored from a Full Moon to the following Full Moon.