|Geocosmic Correlations to Stock Market Cycles|
|Articles - Articles|
|Written by Raymond Merriman|
Article published in The Astrological Journal of Great Brittain, Vol. 42, no 4, 2000
Trading and/or forecasting financial instruments like stocks or commodities by astrology alone, is comparable to eating a sandwich without bread. Or, for those who prefer a gluten-free diet, it is akin to eating a salad without lettuce. The result is that occasionally the forecast will hit the mark, just as occasionally eating the ingredients of a sandwich without the bread, or eating the ingredients of a salad without the lettuce, will satisfy one's hunger. But what is lacking in the forecasts or trading results of a financial astrologer who uses no other analytical tools in forecasting or trading markets other than astrology, is consistency in accuracy. Sometimes the financial astrologer is amazingly accurate in calling for a big rally or big decline in prices, and at other times the market barely registers a hiccup when a big move was forecasted. Worse yet is when the market moves in completely the opposite direction as called for by the financial astrologer. Why does that happen?
The most logical explanation is that astrology is but a market timing tool. It can alert one to those times when a financial market is vulnerable to a reversal in price direction. In fact, it is perhaps the most accurate market timing tool available for this task. But it is not a very accurate tool for identifying the underlying trend of a market, both in terms of the present or the future. Additionally, the classical rules of astrology are not always applicable to the art of forecasting whether the market will make a high or low, based on the idea that soft aspects like sextiles and trines are favorable and therefore should correlate with crests, while hard aspects like squares should correlate with troughs (low in price).
The Right Food
In the real world of forecasting or trading markets, one needs to know how to integrate geocosmic studies (i.e. astrological signatures) with other market analysis disciplines in order to attain consistently excellent results. Astrology alone provides an incomplete methodology. The result is apt to be less than satisfying over the long haul, just like eating sandwiches without bread, or salads without lettuce. On the other hand, using astrology with other disciplines enhances one's accuracy in forecasting over the long haul, which can result in potentially much better trading results. The key then is to understand how each signature can actually effect market prices and trends, because not all astrological signatures are equal. It is the same with sandwiches and salad. Not all sandwiches or salads taste the same. Sometimes we have an urge for peanut butter and jelly. Other times we may wish avocado and cheese, or corn beef or tuna fish. In a salad, sometimes we prefer tomatoes and red peppers. Other times we may have an appetite for shrimp or lobster in our salads. Think of the astrological signatures like those ingredients. Even without them, they are still sandwiches and salads. But with the right combination of ingredients, the results can be very satisfying.
If geocosmic signatures are like the ingredients to a sandwich or salad, then what is comparable to the bread in the sandwich, and the lettuce in the salad? In this author's opinion, it is the study of cycles. But here too, not all cycles are equal, just as not all breads or all lettuces are equal. Sometimes we may prefer whole wheat or rye bread. Other times, maybe a croissant will do. In a salad, sometimes we may be satisfied with normal head lettuce. Other times perhaps romaine or bib or endive is preferred.
The same is true with cycles. There are many market analysts who claim to be adept at cycles, but in fact not all analysts agree on which cycles are actually valid, or even how to use cycle studies. For instance, there is the group that we will refer to as "static cycles" analysts. They believe that every cycle has a definite, fixed length, with no orb of time permissible. As an illustration, they believe a six-week cycle must always happen in the sixth week. It cannot occur in the eighth week. Thus, even though the market is down for only one day in the sixth week, that is their cycle, even if in the next 1-2 weeks prices fall lower, and then rally higher than before that low of the sixth week.
Cycles and Orbs
Then there is the group who apply what we shall refer to as "dynamic cycles." They believe that every cycle has a permissible orb of time away from its median during which it may unfold. For instance, they believe a 6-week cycle can occur in the fifth or seventh week, and maybe even in the fourth or eight week, depending on other variables. They also believe that the lowest price in the cycle is the beginning of that cycle (in a bull market), or the end of that cycle (in a bear market). There cannot be a lower price between the beginning and the end if it is a valid cycle.
Crest and Troughs
There is another difference that one usually finds between static and dynamic cycle proponents. Those who subscribe to static cycles oftentimes make no differentiation between measuring a cycle from trough to trough or crest to crest. They have cycle periodicities for both. And when an expected crest turns out instead to be a trough (or vice-versa), they will claim it as a "cycle inversion." The idea of "cycle inversion" does not exist for adherents to the "dynamic cycles" theory. Here, cycles are measured only in terms of the interval of time between troughs (not the crests). The highest price between the two troughs which define the cycle, is known as the crest of that cycle. If the crest occurs before the middle of the cycle, it is known as "left translation," which is a bearish characteristic. It means that prices spent less time going up, and more time coming down, within that cycle. If the crest occurs past the midpoint of the cycle, then it is known as "right translation," which is a characteristic of a bull market. It means the market spent more time rising in price than falling. Since all cycles have an orb of time in which they may unfold away from the median, there is never a "cycle inversion." The cycle may "skip a beat," but it never inverts, in the methodology of a "dynamic cycles" analyst.
Integrating Cycles With Trends
Successful analysis of markets, and investing in financial instruments, depends greatly on one's understanding of the underlying trend. Like astrology, trend analysis depends upon other factors in order to be of value. To a day trader, a trend may be something that lasts only a couple of hours. To an investor, a trend may be something that has to last over several months, even years.
Types of Cycles
In the study of cycles as outlined in The Ultimate Book On Stock Market Timing, Volume 1: Cycles and Patterns in the Indexes by the author, cycles can be broken down into three types. The first are those that are comprised of three sub-cycles, known as phases, which last approximately one-third the time of the cycles median length. For instance, a three-phase 18-week cycle will be comprised of three sub-cycles, or phases, which last approximately 6 weeks each. The second type of cycle is comprised of two sub-cycles, which last approximately one-half of the cycle's median length. For example, a two-phase 18-week cycle will be comprised of two sub-cycles, or phases, which last about nine weeks apiece. The third type of cycle is a "combination pattern." That is, there will be sub-cycles (troughs) at each 6-week interval, and another at the 9-week interval.
Bull and Bear
In terms of trend analysis, the first phase of every cycle is almost always bullish. However, the last phase of every cycle will tend to have more bearish characteristics. Therefore, the key to understanding the trend is to understand which phase of the cycle (i.e. the next largest cycle) the market is in. If it is in the first phase of the cycle, one must adopt bullish strategies, which means success will be more likely when one buys on corrective declines, rather than looking for opportunities to sell short. If a market is in the final phase of a cycle, then it is not advisable to look for buying opportunities. It is time to sell, or look for opportunities to sell short.
Tying In Multiple Cycle Time Frames
Every cycle is part of a greater cycle. These cycles are but phases of the greater cycle, which are multiples of 2 or 3 to this greater cycle. Conversely, every cycle is made up of smaller cycles. These smaller cycles are known as sub-cycles, or phases of the greater cycle, and are divisible by the number 2 or 3 of the larger cycle.
When studying cycles, one needs to start with the longer cycles, and work downwards to understand its parts, or sub-cycles, or phases. In doing so, one must correctly identify which phase this cycle is in, in regards to the larger cycle of which it is a part. Then one will know whether or not that market is in the bullish (first) or bearish (last) phase of that larger cycle. With this in formation, one can know which way to trade - from the long side (buying) or short side (selling) in order to enhance his or her profitability. In addition, as a forecaster, one can attain a greater accuracy rate in calling for higher or lower prices into the future with this knowledge.
As an example, let's look at the U.S. stock market. Most of the other stock markets of the world, like the FTSE, will show similar patterns and cycles. Let's assume an 18-year cycle in U.S. (and world) stocks began after the "October Crash" of 1987. Let's assume the 18-year cycle which began then will be a three-phase type of cycle. This means it will consist of three sub-cycles that last approximately 6 years each (actually, about 5-7 years each, since we subscribe to the "dynamic cycles" theory). The first phase will last from 1987 to 1992-1994, and it will tend to exhibit more bullish than bearish characteristics, since almost all first phases are in fact bullish. In fact, the first phase did indeed last 7 years, as it bottomed in 1994. It actually formed a double bottom in April and November 1994, in the U.S. In the FTSE, that bottom occurred in June 1994. That concluded the first phase, and as expected, it was indeed a bullish cycle. The second "phase" of the 18-year cycle would thus be due 5-7 years after that, or between 1999-2001. The second phase of a three-phase cycle can be either bullish or bearish, depending upon what phase of its greater cycle the 18-year cycle is in.
What is the greater cycle to the 18-year cycle? If we multiply 18 by either two or three, we should be able to identify that greater cycle. Therefore we have to ask: is there a 36- or 54-year cycle to U.S. and/or world stock prices? And if so, was 1987 the bottom of one of those cycles? Well, it is easy enough to figure out by simply subtracting 36 and 54 years from 1987, and see if that comes close to something like a stock market crash. The short answer is 54 years, which subtracted from 1987 gives us 1933, which is close enough to the bottom of the Great Depression, which occurred in July 1932, as measured by U.S. stock prices. Thus it is very likely that 1987 was not only an 18-year cycle, but also the start (and end) to a longer-term 54-year cycle. Therefore we can conclude (or at least assume) that the current 18-year cycle which began in October 1987 is but the first phase of the even greater 54-year cycle. This 18-year cycle "phase" of the 54-year cycle, then, is (was) apt to exhibit bullish characteristics. Not only that, but the first two 6-year phases of this 18-year cycle (starting again with 1987 low) are also apt to exhibit bullish trends, which they have indeed done.
Well let's take this example one step further. If the second 6-year sub-cycle (or phase) to the 18-year cycle is due to bottom sometime between 1999-2001, what happens next? After this forthcoming low, the stock market will enter its third and final 6-year cycle to the 18-year cycle. The trend in that final "phase" of the 18-year cycle will likely exhibit the most bearish characteristics of the entire 18-year cycle which began in 1987. In other words, if one thought that the decline we are seeing in this year (2000) was difficult, the proverbial "you ain't seen nothing yet," applies to what cycle studies suggest for the decline that will happen at the end of the next 6-year sub-cycle. After all, that will not only end a 6-year cycle, but as well the greater 18-year cycle. As such, it will likely correct the whole move up from the low of October 1987 to whatever the high since 1987 turns out to be. The decline to that low will likely be the steepest and the longest lasting decline of the entire 18-year cycle.
How low is low?
But will it be as devastating as the "Great Depression of 1929-1932?" Probably not. That's because this forthcoming 18-year cycle trough will only end the first phase of the greater 54-year cycle. And that first phase was - will probably be - bullish. Therefore the second phase of the 54-year cycle will also likely be bullish. How do we know (suspect) that? Because in this current 18-year cycle, prices have already been rising to new highs into the year 2000, which is past the midway point of the 18-year cycle. That is, the year 2000 is 13 years after 1987, which is already far more than the halfway point of an 18-year cycle. Therefore this cycle is exhibiting "right translation," which is a characteristic of a bull market. And since it is only the first phase of the greater 54-year cycle, the probabilities are great that the second 18-year cycle "phase" of the 54-year cycle will also be bullish. This also strongly suggests that the move down to the low of this 18-year cycle (due sometime between 2005-2008) will likely be but a correction of the whole move up from the low of October 1987, which is where the cycle began. But the probability of stock prices declining below the low of October 1987 - as many financial and market analysts have predicted - is not very high according to these studies. In other words, don't look for the end of the world just yet. Don't even look for a world-wide financial and economic collapse comparable to the Great depression of 1929-1932 just yet. Maybe something like 1973-1974 is possible, or even 1987, where major stock markets like the U.S. and U.K. lose 40-65% of their value.
Integrating Astrology With Cycles and Trend Analysis
Geocosmic studies, or astrology, is a market timing tool, as is the study of cycles. They are therefore akin to "leading indicators." They will alert one ahead of time as to a possible (even probable) turn in the market. But by itself, astrology may not consistently forecast the amplitude of that turn in the market, or whether or not it really reverses the trend (what trend?). For that one needs to consider other market studies, such as cycles, trend analysis, technical analysis, pattern recognition, and even possibly fundamental analysis. These other studies will also help one to confirm that a trend has really changed. This technical analysis and pattern recognition studies are more like coincident, or lagging indicators. They will not get you in at the absolute (or even near) top or bottom of a price move like astrology and cycles oftentimes can, but they will be more useful for helping you to identify - and hence stay with - the middle two-thirds of a trend. And that's where the greatest profit is realized, and that is where the value of an analyst to his clients is realized.
Earlier it was pointed out that "dynamic cycles" have an orb of time in which that particular cycle can manifest. This orb of time is known as that cycle's time band. As a general rule, a cycle may occur within an orb of time equal to 1/6 of its median length. In other words, an 18-year cycle may unfold every 18 years, give or take three years. Its time band, then, is 15-21 years following its last occurrence. This is true approximately 80% of the time with most cycles, and with most markets. The other 20% of the time a market cycle will occur either before or after this "normal" time band. This is known as distortion. Distortion of a cycle tends to occur when a longer-term cycle is also due. For example, the 18-year cycle of 1987 did not occur 15-21 years after the previous 18-year cycle of 1974. It was only a 13-year interval. That is because the greater 54-year cycle was due as well in 1987 (or thereabouts), and thus the final 18-year cycle was vulnerable to distort. And it did.
Combining Astrology with Trends
Here is where astrology comes in. If the study of cycles can identify a time band when a cycle trough or crest is due, then astrology can help to narrow that time band further. Why? Because in the vast majority of cases (i.e. about 77-83%, depending on the market, according to studies reported in the author's published works), a cycle will culminate when a combination of certain geocosmic signatures occur nearby.
Just as market cycles have orbs of time away from their median in which they may occur, so too do we find that markets will top or bottom within a given number of days (or weeks, or months even) away from a prominent astrological signature. The general rule is that the shorter in time the geocosmic signature cycle, the more accurate it will be in pinpointing a turn in the market. Or, the less amount of orb it will need to correlate with an actual market cycle. But here is a more important rule: the longer the geocosmic cycle, the longer (and greater) the market cycle it correlates to. In other words, trying to time an 18-year cycle using only the fastest moving planetary transits will likely be an exercise in futility. Long-term market cycles tend to occur nearby to the time in which long-term planetary cycles are occurring. This concept was illustrated very clearly through the studies reported in The Ultimate Book on Stock market Timing Volume 2: Geocosmic Correlations to Investment Cycles² by the author. Here one can see clearly that it was the aspects between Saturn, Uranus, Neptune, and Pluto which most often correlated to 4-year or greater cycles in U.S. stock prices. The aspects between Jupiter and the faster moving planets were not consistently present when these longer-term stock market cycles unfolded. However, many of these shorter-term term planetary combinations were consistently present when shorter-term stock market cycles unfolded, and are therefore of great value to traders - given that the time band for a cycle is in force.
Knowing your History
And herein lies the key to using astrology successfully in forecasting financial markets. One needs to know where the market is in terms of its cycles (i.e. what cycles pertain to this market and which phase of those cycles is it in) in order to determine whether or not a particular geocosmic signature will have much impact when it unfolds. One needs to know the history of that geocosmic signature's correlation to market cycles in the past. For just as salads differ according to the ingredients one adds to the lettuce, and just as sandwiches differ according to the ingredients one places between the slices of bread, so too do market prices and type of trend changes differ according to which astrological signatures are present within the time band of a particular cycle.
In conclusion, we can note that the period of time between mid-1999 through mid-2000 contains an unusually large amount of long-term planetary signatures. Saturn is in waxing square to Uranus, Jupiter in waxing square to both Neptune and Uranus, and Jupiter is conjunct Saturn. Furthermore, the second phase of the 18-year cycle is due between 1999-2001. Is it any wonder that many of the world stock indices have made their all-time high during this period, followed by one of their steepest declines since 1987? Not if you understand financial astrology and cycle studies. And if you do, then you have a powerful road map for the stock market over next six years, and even far beyond.