Eclipse

Stocks & Commodities V. 9:12 (512-515): Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

T

he ancients saw eclipses of the sun and moon as something mysterious and magical. The high priest

of the day controlled the masses by telling them: "Look out, there is an eclipse coming. Do as I say to avoid its ill effects." The modern-day equivalent, the modern stock market adviser, advises the trading and investing masses much the same way: "Look out, there is an eclipse coming. Trade and invest as I say to avoid its ill effects." And sometimes there is an effect. Look at the Dow Jones Industrial Average (D JIA) for August 6, 1990, for an example. The intraday chart of August 7 shows that the market opened with a dramatic 100-point plus nosedive, which stopped abruptly at 10:15. At 10:10 that morning, a lunar eclipse peaked. The trading masses were somehow affected. But often there is no effect. Do eclipses really matter, or are these high priests simply repeating the folklore handed down by others? Do eclipses really cause trend changes? Do these trend changes really occur regularly, or is this just market folklore? Is there a rational explanation of how eclipses could affect markets? Let's look at the eclipse cycle. MECHANICS OF ECLIPSES Eclipses are alignments of the sun, moon and the Earth. The plane of the Earth's orbit around the sun, called the "ecliptic," is used as a reference plane for astronomy. This plane always passes through the Earth and the sun . The moon's orbit tips about five degrees to this plane. As the moon travels around this orbit, it crosses through the ecliptic. This crossing point is known as a "node." Since the moon crosses through the plane once from above and once from below on each orbit, it has two nodes—the north node, when the moon crosses from below, headed "north," and the south node. The Chinese called these two nodes the "dragon's head" and the "dragon's tail," and thus, the moon's cycle of passing from north node to north node became known as the draconic cycle. On average, the draconic cycle is 27.212221 days long.

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Stocks & Commodities V. 9:12 (512-515): Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

FIGURE 1: The effect of an eclipse, direct or indirect, can be seen here. Here, the market opened with a dramatic 100-point plus noisedive, which ended abruptly at 10:15.

FIGURE 2: A lunar eclipse occurs when the Earth blocks the sun's light and casts a shadow on the moon. A lunar eclipse has also been shown to have an effect on the markets.

Stocks & Commodities V. 9:12 (512-515): Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

Eclipses affect markets because eclipses mark points when the moon exerts maximum influence on the flow of energy from sun to Earth. The moon also makes a "synodic" cycle. (Synod means "coming together.") When the sun, Earth and moon come together in a straight line, we have new moons or full moons. Since the sun lights up the moon, these are easy to observe. The lunar synodic cycle averages 29.530589 days. Much of the time, the moon is above or below the ecliptic plane when it is at new or full moon. These are ordinary new or full moons. Sometimes, however, the moon is very close to the ecliptic, and eclipses occur. Figure 2 shows a lunar eclipse, when the Earth blocks the sun's light and casts a shadow on the moon. Figure 3 shows a solar eclipse, when the moon blocks the sun's light, casting a shadow on the Earth. ENERGY FLOW AND THE ECLIPSES The shadows of light are not the most important things about eclipses; what is important is the effect the eclipses have on the energy flow from the sun. My theory of how physical cycles affect markets is explained in Figure 4. As the planets orbit the sun, they exert tidal forces on the gases of the sun, much as the moon raises tides on Earth. In Figure 4, this tidal effect is shown as planets 1 and 2 rotating around a gaseous portion of the sun's surface. These gas swirls cause several solar effects, including sunspots and solar flares. These combine to vary the amount of radiation that leaves the sun. The solar radiation travels toward Earth in two ways: as direct radiation, such as sunshine and radio waves, and as particles, carried by the solar wind. This flow of charged particles forms a torrent of energy that blasts Earth, creating a bow wave and a wake, just the way a boat going upstream does. This bow shock wave forms a magnetopause between the Earth and the sun and interacts with Earth's magnetic field, shaping and adding energy to it. At the north and south poles, the charged particles follow the magnetic lines of force and enter our atmosphere, leading to an atmospheric condition called an "auroral oval," which produces our northern and southern lights. The bow wave also creates an envelope about Earth called a "magnetosphere." As the solar wind flows past the Earth, the magnetosphere forms a teardrop-shaped envelope of trapped particles, ending in a "magnetotail." As the solar radiation varies, so does the Earth's magnetic field, atmospheric ionization and temperature. A host of relationships have been tracked down between these events and a variety of earthly phenomena such as climate, weather, crime rates, plant growth rates, frequency of thunderstorms, blood PH levels and psychiatric emergencies. My research has correlated these events with market action as well.

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clipses affect markets because eclipses mark points when the moon exerts maximum influence on this

flow of energy from sun to Earth. During a solar eclipse, the moon is actually outside the bow wave and, at the exact time of the eclipse, does its best job of blocking the energy flow from the sun. During a lunar eclipse, the moon is in the plasma sheet behind the Earth, where it normally reflects not only light but

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Stocks & Commodities V. 9:12 (512-515): Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

FIGURE 3: A solar eclipse occurs when the moon blocks the sun's light, casting a shadow on the Earth.

FIGURE 4: As the planets orbit the sun, they exert tidal forces on the sun's gases, shown here as planets 1 and 2 rotating around a gaseous portion of the sun's surface. These gas swirls cause several solar effects, including sunspots and solar flares.

Stocks & Commodities V. 9:12 (512-515): Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

ionized particles back toward Earth. At the precise time of the lunar eclipse, this reflection is temporarily stopped. These energy flow disruptions affect the electromagnetic field, which affects traders, who effect changes in markets. STUDYING ECLAPSE MARKET HISTORY Figure 5 shows an annotated chart from my study of eclipses. I examined all eclipses since 1900, looking at their effect on the DJIA. As shown, eclipses occur in clusters of solar, lunar and "near" eclipses. A near eclipse is an approximate alignment of Earth, moon and sun that falls short of being an eclipse, but is close. The eclipses are marked with different height lines. The tallest lines are solar eclipses. The next tallest are lunar eclipses. The third tallest are near-solar eclipses and the fourth tallest near-lunar eclipses. Looking at this chart, one can see that eclipses do appear to affect the markets. These charts were used to build a spreadsheet database. Each eclipse was classified as having no effect, a minor effect (less than 10%), or a major effect on stock prices. Studied were percentage of movement, duration of moves and plausible contributing causes, such as time of the year, and planetary alignments. A sample of the statistics generated from this information is shown in Figure 6. Fully 51% of all eclipses appear to move the market. Of that 51%, 18 % of the eclipses appeared to have caused major market moves, while 33% caused minor moves. Further, if one only looks at the clusters of eclipses, more than 90% have a minor or major effect. Figure 6 also shows several other factors. Solar eclipses appear to be more effective than lunar eclipses by more than 10 percentage points. This may be because solar eclipses should be more effective, because they are directly blocking the flow of solar energy while lunar eclipses deal with reflected energy. Near eclipses may be just as important as solar or lunar eclipses. Modeling the energy flows suggests that these near eclipses should be important, and this appears to be the case. So there is statistical evidence that eclipses affect markets. But traders can do more than just watch each eclipse helplessly as it comes. A trader can:
Find the times of the solar eclipses (found in almanacs, many calendars and in astronomical almanacs)
Mark those times on a price chart as a dot, placed either above or below the price
Sketch the cycle as a straight line between the dots, adding inversion points as necessary at the mid-points or third points between dots
Use this information to anticipate the next eclipse point turn
Complement this with other techniques, such as trendlines, to trade the eclipse cycle Figure 7 shows how this technique was used to anticipate a low in the Nikkei in July 1991. In this case, the index was running on the half-eclipse cycle, turning near eclipses and halfway between them. Eclipses are important natural cycles. Careful study and correlation with market action will permit the serious market student to derive important trading rules from the appearance of eclipses. These rules, coupled with basic cycle analysis and other technical tools, can aid a trader in his or her quest for success. Hans Hannula, (303) 452-5566, publishes the Market AstroPhysics newsletter. He is an engineer, programmer and trader with more than 25 years' experience and writes frequently for S TOCKS &

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FIGURE 5. Here, an annotated chart from Hannula’s study of eclipses, from 1900 on. The various vertical lines represent different types of eclipses.

ECLIPSE STATISTICS

PERCENTAGE OF MOVE TYPES BY ECLIPSE TYPES Major Minor None Major + minor

SOLAR SOLAR NEAR 22.50% 18.60% 34.00 35.70 43.50 45.70 56.50 54.30

LUNAR LUNAR NEAR 14.20% 14.70% 31.50 30.90 54.30 54.40 45.70 45.60

ALL 18.00% 33.00 49.00 51.00

FIGURE 6. Here, an example of the spreadsheet database. Fully 51% of all eclipses appear to move the market. Of that, 18% appeared to have caused major market moves, while 33% caused minor moves. Solar eclipses appear to be more effective on the markets than lunar eclipses.

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FIGURE 7. The eclipse trading technique was used to anticipate a low in the Nikkei in July 1991. In this case, the index was running on the half-eclipse cycle, turning near eclipses and halfway between them.

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Stocks & Commodities V. 9:12 (512-515): Trading The Eclipse Cycle by Hans Hannula, Ph.D., C.T.A.

COMMODITIES.

REFERENCES Astronomical Almanac [1990]. U.S. Government Printing Office. Blizzard, J. B. "Lunar Newsletter," Boulder, CO. 1986-1990. Clayton, H. H. [1917]. Effects of Short Period Variations of Solar Radiation on the Earth's Atmosphere, Smithsonian Institution. Danby, J.M.A. [1962]. Fundamentals of Celestial Mechanics, Wilman-Bell, Richmond, VA. Gann, W.D. [1927]. Tunnel Through the Air, or Looking Back from 1940 , Lambert-Gann Press. Gleick, J. [1987]. Chaos: Making A New Science, Viking Press. Hannula, Hans [1991]. "The seasonal cycle," STOCKS & COMMODITIES, November. ___ [1991] Trading the Eclipses , MicroMedia. Herman, J.R., and R.A. Goldberg [1985]. Sun, Weather, and Climate , Dover Publications. Landscheidt, T. [1988]. "Multidisciplinary forecast of stock prices," Cycle Proceedings, May. ___ [1989]. "Predictable cycles in geomagnetic activity and ozone levels," Cycles, September/October. Luby, W.A. [1945]. "The cause of sunspots," Popular Astronomy, February. Matlock, C.C. [1977]. Man and Cosmos, Development Cycles Research Project. Meeus, J. [1985]. Astronomical Formulae for Calculators, Wilman-Bell. McCormac, B.M., ed. [1983]. Weather and Climate Responses to Solar Variations , Colorado Associated University Press. Old Farmer's Almanac [1990]. Yankee Publishing. Pugh, B.H. [1928]. Science and Secrets of Wheat Trading , 6 volumes. Shirley, J.H. [1988]. "When the sun goes backward," Cycles, May/June. Temple, R.K.G. [1987]. The Sirius Mystery, Destiny Books. Thompson, L.M. [1988]. "The 18.6-year and 9.3-year lunar cycles," Cycles, December.

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