Financial astrology: How do the movements of celestial objects affect the stock market?

Question

I noticed that there are many published research papers about financial astrology. There's also a book published by Wiley: A Trader's Guide to Financial Astrology: Forecasting Market Cycles Using Planetary and Lunar Movements.

Those reading materials are too advanced for me since I am not a finance professional or an astrologer, but I'm curious: how do the movements of moons, planets, stars and other celestial objects affect the stock market?

The theoretical basis of technical analysis is that "past price movements can predict future price movements". What is the theoretical basis of financial astrology? I am sure that it is not "past celestial object movements can predict future price movements" because astronomers are able calculate the positions of astronomical objects far in advance. Such a theoretical basis would imply that stock market movements for the next few decades can be calculated right now, which is nonsensical. This leads me to believe that financial astrologers are using sophisticated methods based on more advanced theoretical foundations. What are these foundations?

Answer 1

I think that the idea of the stock market and astrology is a steaming load of mumbo jumbo. And yet...

The Hulbert Financial Digest has been tracking the performance of investment advisory newsletters for 40 years. It was acquired by CBS MarketWatch and then acquired by Dow Jones and renamed MarketWatch. I remember it from the 80's, before the internet. It's reputable.

Arch Crawford, formerly of Merrill Lynch, is a financial astrologer who has been publishing a financial newsletter for even longer than that. His advice is based on technical analysis, sentiment indicators and planetary movement.

Hulbert rated Crawford the country’s top stock market timer a number of times with his biggest win in 2008 when he called the pending crash. He was the top performing stock market timer for the five year period through 1995.

Mumbo jumbo or or should you be thinking differently about how Uranus moves?

Answer 2

Before going into the financial astrology aspect, you have to step back and look at whether astrology in general works i.e., is there any scientifically sound research work. I have not found any.

Secondly, and more importantly, people who do this kind of stuff (forecasting stock prices based on astrology) are very shady. Even if there was someone who can do it right, there will be thousands more who are there to scam gullible folks and when looking for the genuine stuff you will most likely run into these shady guys which is a big risk.

Thirdly, if something goes wrong, I don't think you can take any legal help unless there is any regulatory oversight which isn't in such kinds of things.

I would suggest you stick to educating yourself about how financial markets work and the underpinning of equity analysis/quantitative analysis/technical analysis etc to understand what market commentators are saying and which views may be more relevant to your investing style rather than look for obscure methods for forecasting stocks movements.

That said, it is good to spend some time on researching new areas/techniques/contrarian views etc. but not let that be your main focus. This way you can keep an eye out for new developments and ideas as well while being safe with your finances.

Answer 3

I don't like to reference other answers In my answer, but there was one item that stood out in the other answer:

Hulbert rated Crawford the country’s top stock market timer a number of times with his biggest win in 2008 when he called the pending crash. He was the top performing stock market timer for the five year period through 1995.

there was a comment that asked:

"He was the top performing stock market timer for the five year period through 1995" How did he do over the 25 years since then?"

So what heppened right after 2008?

This is from January 2010 marketwatch:

We will do everything but guarantee you that stocks will crash worldwide within three months of August first (that is between May 1 and November 1). It is expected that technical market analysis of data generated by current market action will assist in pinpointing most danger/opportunity as critical moments approach. The fate of the world is in the balance

Over the past three years, the letter is up an annualized 8.17% by Hulbert Financial Digest count compared to a negative 5.25% annualized for the dividend-reinvested Wilshire 5000 Total Stock Market Index.

Crawford's given back some ground more recently -- over the past 12 months, the letter was down 9.96% against a 28.3% gain for the total return Wilshire 5000. And over a long career, he's had ups and downs.

Sound like he had a great 2008, but then a very bad 2009. He lost almost 10% while the rest of the market gained 28%.

and by the end of 2010 is was in the list of terrible 10 letters:

Crawford Perspectives, Arch Crawford: -12.4%

So the performance of this method bounces around. Anybody who looked at the great results of 2008 and invested heavily on the advice from the planetary alignment , would have been disappointed in 2009 and 2010.

regarding the 2010 prediction according to marketwatch:

But the opening of Crawford's July issue is definitely the sort of thing that upsets people: "NEVER SEEN ANYTHING LIKE JULY! We mean, of course, the planetary pictures in the sky which are developing towards the tightest harmonic alignments in the most potent areas of the zodiacal circle ever recorded in Earth's written history. These portend increasing and maximizing intensity and rapidity of 'change' on every level of existence: mineral, vegetable, animal, human and spirit. Will Capitalism survive? Will Democracy survive? Will our markets survive? Will governments survive? Will humanity survive? Will Earth survive?

"We don't know, but we'll be SHORT for it!"

Answer 4

tl;dr: You can make money using financial astrology. You might even beat the market with it.

My father is a physicist. He spent much of his career analyzing data, and when I was a kid he showed me how he could take pretty much any set of linear (non-random) data points, and he could find an equation that would yield those points. I once asked, "But is that really useful? Was matching to existing data predictive of new data points?" He told me, "Sometimes it ends up being predictive, and when it is it's a lot more fun! And then I might get another patent..." (He has over 100 patents.)

Humans are wired to notice patterns and predict future events based on them; it's one of our survival mechanisms. Some people are much better at it than others, and this is true in pretty much all aspects of life. The thing that makes astrology in particular so compelling is the fact that it's cyclical, and there are so many objects with various cycles that you can pretty much match any set of historical data points to something celestial if you try hard enough. But obviously the interesting question is whether or not it's predictive of future data points. Well, on average, in relation to stock markets, the markets are generally increasing, so it doesn't matter that much as long as the decisions it guides you to make do not deviate too far from the norm. You'll make money at approximately the same rate, but it just might be a heck of a lot more fun, especially if you believe in it. And if you do end up beating the market (which you might just have a 50% chance of doing any particular year), who's to say you can't go on to write some books and start teaching it to other people?

If you aren't satisfied by this answer yet, then consider this: celestial objects were set into motion nearly 14 billion years ago. The observable patterns of bodies are well known, and can be predicted from long ago to far into the future. Stock market fluctuations are a direct result of human reactions to corporate decisions, national and world events, and the way the news media reports on those events. If you believe celestial bodies are causing pandemics, technological breakthroughs, acts of war and terrorism, political maneuvers, corporate decisions, and the way the media reports on them, well, then, I promise you, we probably could have known a billion years ago (but definitely 100 years ago), that Jupiter was going to do that interesting thing tomorrow. It doesn't mean it's time to buy more gold.

Further reading in this answer.

Answer 5

I don't think that I need to provide any citations that astrology is nothing but a baseless pseudoscience. With the exception of the tides caused by the moon, the movement of celestial bodies has no physical effect on anything that happens on Earth.

And yet, there is a psychological effect! Because any prediction about the stock market becomes a self-fulfilling prophecy if enough people act on it.

Regardless of the lack of any scientifically valid proof that astrology works, there are still people who believe in it. People who might make financial decisions based on their horoscope. And those financial decisions might affect the stock market. So:

1. Study astrology to predict what horoscopes the astrologers are going to provide in the near future
2. Estimate what investment decisions people will make depending on the horoscopes they are going to receive
3. Estimate the price changes on the stock market which will result from these investment decisions
4. ???
5. Profit!

But in order for this to provide you with any reliable market forecast, you have to assume that the amount of money invested based on horoscopes is non-negligible compared to all the other factors which affect the markets. And then you have to assume that the horoscopes those investors receive are actually based on the same interpretations of established rules of astrology you are using and not just made up on the spot (most horoscopes are made up). And those are two big if's.

So unless you are targeting stocks of companies which are specifically attractive to investors who actually believe in horoscopes (or rather the even smaller subset who are knowledgeable enough to only believe in "real" astrology, yet are still too naive to understand that there is no such thing as "real" astrology), you will likely not see much correlation between astrology and stock prices.