Nearly two weeks ago, market analyst Paul Macrae Montgomery wrote an eight-page report to clients giving various reasons to be flat in their positions heading into March because of the increased chance of financial market volatility.
At the very end of the report, Montgomery added another reason to be cautious, an upcoming so-called Supermoon, a full moon occurring while the celestial body is at its closest distance to Earth that is “associated with high tides, earthquakes, volcanism and weather anomalies,” he wrote.
Eleven days later, the biggest earthquake in 140 years tragically hit Japan, rocking global markets. Since the report, the S&P 500 is down 2 percent and the CBOE Volatility Index is up 10 percent.
Was it just a coincidence? Absolutely, say many astronomers who see no statistically relevant relationship between full moons and natural anomalies. But not so to some Wall Street traders, a superstitious bunch that still trades on calendar events like the “January Effect” and a sequence of numbers first discovered by 12th century mathematician Fibonacci.
“I’ve been doing this for 40 years and there’s definitely something to it (the lunar cycle), but it’s just not the full picture,” said Montgomery Friday, who CNBC.com first interviewed on March 1, about his report. “We are still in this stress period that affects the earth and people’s nervous systems so there might be some more volatile events ahead.”
The veteran, press-shy analyst based in Newport News, Va., was particularly motivated to add the lunar cycle to his cautious report because of the rarity of the event approaching on March 19. This giant full moon will occur with the satellite at its closest distance in nearly two decades and near the shortest in a century, points out Montgomery.
“We were laughed at two weeks ago when we wrote of the impending close approach of the moon to the Earth this week and next,” said Dennis Gartman in his widely respected The Gartman Letter this morning. “We warned then of increased quake activity during the next several weeks. We shall warn again of that likelihood.”
Like Montgomery, Gartman doesn’t write about the lunar cycle every day. They look at it as just a small part of the bigger investment picture that only takes on particular importance when there’s an extreme astronomical occurrence about to take place.
Still the science community seems to frown upon associating any geological events with the lunar calendar. While the distance of the moon does affect the tides, its gravitational pull is not strong enough to trigger the kind of catastrophic events seen in Japan Friday, they say.
“It would make some sort of sense to think that maybe there is a connection, since the moon pulls on the Earth, and the majority of earthquakes are caused by tectonic plates slipping past or under each other,” according to a blog posted Friday on the “Discover” magazine web site.
“However, you can look at the timing of earthquakes versus the distance (and phase) of the moon, and at best there is a weak correlation between shallow, low intensity quakes and the moon…and certainly none with major quakes.”
We should note that both Gartman and Montgomery do not mean in any way to gloat in the aftermath of such a tragedy affecting the lives of thousands in Japan. They are simply noting the events of this month, including those in the Middle East, justify their more open-minded approach to looking to all things out there for a trading edge.
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