Tuesday 23rd September is the Fall/Autumn equinox. Equinoxes occur twice a year, the other being around 20th March.
The last 4 major tops and bottoms in the SP500 all fell within 2 weeks of an equinox:
Extending this to include major turns in the period that took place within 2 weeks of an equinox, we get this:
Highs around the equinox? Inversions happen occasionally in lunar phasing. Full moons bring about pessimism and typically mark lows, but now and again they can invert as a high. As geomagnetism is a similar sentiment phenomenon, I expect the same sometimes happens here, but I can’t be more scientific. Nonetheless, if next week’s equinox is to have any relevance, then it would most likely be as a top, or inversion high, because we have not seen a period of selling into it for it to mark a low, as we did into the lows 1998-2011 shown above.
Looking further back in stock market history, in 1987 stocks peaked 1 month before the Fall equinox and completed their devastation one month after, so centred around it. The 1976 top and 1978 bottom in the Dow were both within 2 weeks of equinoxes, but other major tops and bottoms in the 1970s secular bear didn’t align, clustering rather at the turn of the year and seasonal high. In 1929 there was a mini-crash March 25 (equinox), the Dow topped 3 September, the London stock exchange crashed 20 September (equinox), and the whole combined crash process was done by November 13.
In short, I would summarise that maybe there is an equinox phenomenon. The most compelling reason for it is the stock market seasonal lows that occur close to them (circa March and October), driven by geomagnetism which affects human sentiment. On these grounds, most major turns would be lows at equinoxes, and just occasionally we would see an inverted high.
One more add: next week’s equinox falls one day from the new moon and new moons typically mark highs (both minor turns and major peaks) so if it were to mark a high then there’s an additional reason for it to do so. For this to have any merit, stock market indicators would need to be signalling such an imminent peak.
Yesterday was a bullish day for large caps and overnight action looks to have cemented a break out. Small caps and junk bonds again didn’t share the optimism, negative divergences persist on large caps, sentiment and allocations are very stretched, and ‘normally’ this would mean an attempted breakout becomes a fake-out. Wider indicators continue to warn that this is the last gasps of a topping process, and as I have covered recently there is no case for a rally much higher or much longer. e.g. 20% higher into mid-2015, as this would negate a whole host of reliable indicators. The evidence leads me to believe that the stock market will peak here and collapse through the seasonal low of October – or, failing that – it presses on and peaks at the seasonal high of the year-end (a historical clustering targets 31 Dec).
I have difficulty believing the end-of-year option because indicator extremes and divergences are already very mature, whilst sentiment and allocations suggest little fuel for higher or longer. We would need to print anomalies in various indicators with different angles on the market to achieve it, and it would be a major stretch to achieve. Additionally, the smoothed solar max looks likely to have been around March and various risk measures peaked then or either side of that, which suggests this is already ‘borrowed time’. That said, price just won’t obey yet and until it does, I have to consider this possibility.
If large caps consolidate their breakout and push on through the new moon and equinox, pulling up small caps and other laggards too, then the end-of-year option will gain weight. If stocks hold up through the month of October then that would seal it, in my opinion.
But… the charts below show how things stand, and these are why I just can’t believe the market can truly break out upwards here. These charts are indeed supportive of a new moon / equinox peak. Plus it’s the week after expiration, normally bearish, and also a week of geomagnetic disturbance is predicted.
I may cut back short positions if (despite the indicators) stocks collectively motor here, but my eye is on the new moon / equinox combination next week. UBS see high likelihood of an important reversal in the next 3 sessions, and FX positions and technicals continue to be extreme, suggestive of an imminent reversal with associations for risk.