Various Seasonality

Does the Moon Influence the Rates of Trading Instruments?

Elena Berseneva 10 january 2022 266 4

It is believed that the Moon strangely influences people’s behavior, especially during full moon and new moon.


Back in 5-4 century B.C., the scientist Galen for the first time formulated conclusions about the impact of lunar-related rhythms on the mental state of a person.


So, does the phase of the moon influence the rates of financial instruments?


From research that has been carried since 1988, analysts at the investment bank Macquarie Securitiesconcluded that the return on investments in global financial markets reaches a peak by new moon.


In 1974, Todd Lofton found that short-term price movements occur with a certain regularity depending on the phases of the moon. In fact, commodities chosen for this analysis (silver, wheat, cacao, and sugar) showed a strange tendency to form a rising market after full moon and a falling market after new moon.


Let us see if this is really true.It is believed It is believed.

Hypothesis
To conclusion

On waning moon (the phase of the moon between full moon and new moon), the rates of financial instruments, against the US dollar, rise; on waxing moon (the phase of the moon between new moon and full moon) they fall.

To conclusion

Let us test the hypothesis with historical data of the quotes of financial instruments for a period longer than 20 years.

Data used

Financial instruments:

  • Commodity futures: gold, wheat, corn, sugar, coffee, oil, natural gas;
  • Stock indices: SP500, DOW30;
  • Currency pairs: EURUSD, GBPUSD, AUDUSD, NZDUSD, USDJPY, USDCHF, USDCAD.


We tool the closing quotes from a daily time-frame for the analysis (D1).


Total: 13 571 values.


Data sources:


Financial instrument
History depth
Futures on wheat (ticker ZWZ)
1990-2019
Futures on gold (ticker GCZ)
1980-2019
Futures on corn (ticker ZCZ)
Futures on sugar (ticker SBZ)
Futures on coffee (ticker KCZ)
Futures on oil of Brent (ticker LCOZ)
1988-2019
Futures on gas(NG)
1990-2019
Index SP500 (ticker S&P 500)
1993-2019
IndexDOW30 (tickerDOW30)
1998-2019
EURUSD
1980-2019
GBPUSD
AUDUSD
NZDUSD
1988-2019
USDJPY
USDCHF
USDCAD
1982-2019



Description of the algorithm for the calculation:


Buy on waning moon.

Sell on waxing moon.


We will estimate the result by two criteria:

  • Momentum (%) reflects the average change of the price between moon phases. Momentum can be both positive and negative. A positive momentum will prove the hypothesis under consideration, and a negative impulse will disprove it.
  • Share of positive momentums (%).


The results for futures on commodities and indices are introduced in the following tables and diagrams:



Buys on waning moon


Financial instruments
Momentum,%
Share of
positive momentums, %
Number of phases
Gold
0.37
51.9
491
Wheat
0.08
44.5
366
Sugar
0.59
50.5
491
Coffee
0.38
49.5
491
Corn
0.08
48.7
491
Average on
commodity futures
of the 1st group
0.3
49.0
Oil
0.31
51.8
386
Gas
0.0003
48.9
364
Average on
commodity futures
of the 2nd group
0.16
50.4
SP500
0.49
62.3
329
DOW30
0.52
59.2
267
Average on indices
0.51
60.7
Average on groups
0.32
53.4



Sales on waxing moon


Financial instruments
Momentum, %
Share of
positivemomentums, %
Number of phases
Gold
0.02
50.9
491
Wheat
-0.04
50.0
366
Sugar
-0.001
53.8
491
Coffee
-0.02
52.1
491
Corn
-0.26
47.9
491
Average on
commodity futures
of the 1st group
-0.06
50.9
Oil
-0.52
44.3
386
Gas
-1.15
47.3
364
Average on
commodity futures
of the 2nd group
-0.84
45.8
SP500
-0.17
43.8
329
DOW30
-0.04
44.8
268
Average on indices
-0.11
44.3
Average on groups
-0.34
47.0


The average momentum received in the phase of waning moon (0,32%) is positive; in the phase of waxing moon (-0,34%) the momentum is negative.


In other words, the following parts of the hypothesis:

  • the rise in the price of futures on commodities and indices during waning moon is proved;
  • the fall in the price during waxing moon is disproved.


That is, the prices of the futures on commodities and indices also rise during waxing moon, but to a lesser degree. The futures on oil, gas and corn are exceptions. During waxing moon, their prices rise more significantly compared to waning moon.


We will graphically introduce movements of the price of the SP500 index, according to the phases of the moon (green is a phase of a waning moon; yellow is a phase of waxing moon):

We note that 5 out of 7 falls of the average price of SP500 occur during waxing moon (the phase between new moon and full moon); for the remaining 19 phases of the moon, the average price of SP500 rises, and the growth during waning moon is higher compared to waxing moon.


We can explain the price growth of SP500 both during waning moon and waxing moon by its ever-growing nature. It means that the indices grow in the long-run rather than fluctuate within a flat or fall as it may occur with currencies, for example.


We shall see this later in the article.



But for now, we will compare average daily impulses from buys during waning moon and average daily movements of indices SP500 and DOW30 on a year-by-year basis:


SP500
Index change, %
Momentum of buys, %
1993
0.026
-0.003
1994
-0.004
-0.049
1995
0.123
0.055
1996
0.072
0.028
1997
0.117
0.122
1998
0.102
0.156
1999
0.073
0.138
2000
-0.036
-0.075
2001
-0.034
-0.079
2002
-0.080
-0.092
2003
0.085
-0.042
2004
0.034
0.001
2005
0.023
0.057
2006
0.046
0.068
2007
0.015
0.133
2008
-0.142
-0.215
2009
0.093
0.156
2010
0.052
0.159
2011
0.012
0.075
2012
0.058
0.102
2013
0.092
0.167
2014
0.049
0.059
2015
-0.004
0.072
2016
0.049
-0.018
2017
0.071
0.054
2018
-0.019
0.130
Average
0.033
0.044


DOW30
Index change, %
Momentum of buys, %
1998
0.079
0.107
1999
0.090
0.194
2000
-0.016
-0.021
2001
-0.012
-0.127
2002
-0.049
-0.031
2003
0.081
-0.054
2004
0.013
-0.018
2005
0.006
0.008
2006
0.057
0.081
2007
0.023
0.136
2008
-0.115
-0.180
2009
0.074
0.131
2010
0.044
0.139
2011
0.033
0.080
2012
0.034
0.089
2013
0.083
0.142
2014
0.034
0.023
2015
-0.010
0.074
2016
0.061
-0.019
2017
0.090
0.070
2018
-0.015
0.146
Average
0.028
0.046


The average daily momentums of buys during waning moon slightly exceed average daily movements of indices SP500 and DOW30. That is, buys during the waning phase of the moon marginally overtake the growth of indices.



Let us move on to currencies.


The results for currency pairs are introduced in the following table and diagrams (for precise calculations, the currency pairs were inverted: JPYUSD, CHFUSD и CADUSD):



Buys during waning moon


Financial instruments
Momentum, %
Share of
positive momentums, %
Number of phases
EURUSD
0.08
53.2
491
GBPUSD
0.08
53.8
491
AUDUSD
0.03
51.3
491
NZDUSD
0.18
53.6
390
JPYUSD
0.04
49.2
390
CHFUSD
0.29
54.9
390
CADUSD
0.07
52.6
466
Average
0.11
52.6



Sales during waxing moon


Financial instruments
Momentum, %
Share of
positive momentums, %
Number of phases
EURUSD
0.11
53.8
491
GBPUSD
0.16
50.9
491
AUDUSD
0.08
49.1
491
NZDUSD
0.14
48.7
390
JPYUSD
-0.05
49.5
390
CHFUSD
0.15
52.8
390
CADUSD
0.08
51.3
466
Average
0.09
50.9

Average momentum, received in the phase of waning moon (0,11%), is positive; in the phase of waxing moon (0,09%) it is also positive.


That is, the hypothesis, on appreciation of considered currencies against the US dollar during waning moon and on decline of currencies during waxing moon is proved. However, the momentum is slight, and we can view the signal of the phases of the moon as ineffective for currency pairs.


We will graphically introduce movements of currency rates in %, according to the phases of the moon (green marks the phase of waning moon; yellow marks the phase of waxing moon):

We can note that small currency appreciation against the US dollar occurs during waning moon (the phase between full moon and new moon), and a slight fall occurs during waxing moon (the phase between new moon and full moon).


All the considered currencies were taken in their were taken paired with the US dollar (USD). This means that we can conclude that the US dollar depreciates less during waning moon and strengthens more during waxing moon.

Conclusion

In the period of waning moon:

  • The price of commodities and indices rises.
  • Rates of currency pairs, against the US dollar, increase marginally.
  • The US dollar slightly weakens.


In the period of waxing moon:

  • Futures on currencies and indices also grow, but to a lesser degree. Exсeptions are oil, gas, and corn. Their prices rise more during waxing moon.
  • The US dollar marginally strengthens.


Therefore, it has been identified that in the phase of waning moon, commodity and stock markets grow. The influence of the phase of the moon growth on financial markets has not been identified.


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