Interactive Investor

Chart of the week: the other markets affected by the equinox

28th September 2020 13:42

John Burford from interactive investor

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Market reversals caused by shorter or longer days are not exclusive to the S&P 500, according to our chartist.

In my last piece I highlighted how often trend changes in financial markets can occur around the time of an equinox (and also around solstices). 

If a link can be established, does that help identify a factor driving markets that is ignored by many conventional analysts?

I showed the S&P 500 chart last week, and this is that chart updated:

Source: interactive investor. Past performance is not a guide to future performance.

Last week, the market was testing the lower tramline and this is what I wrote: “A hard break down here would massively increase the odds that the 2 September high marked the high of the entire bull market in stocks going back a very long time.”

And right on cue, the market broke below the tramline so that odds have now swung in favour of a new bear trend. Near-term, the market may rise up to kiss the lower tramline and, if it is repelled, we can expect a ‘scalded cat bounce’ lower.

That is one market showing an effect, but are there others?

Here is the soybean oil futures chart (this is a heavily traded market in Chicago that is also one of the oldest).  

It is a market dominated by producers, users and speculators and is thus one of the few public markets that is relatively ‘free’.

Source: interactive investor. Past performance is not a guide to future performance.

From the Spring equinox in March, the market reversed sharply and staged a furious rally right into the Autumn equinox where it promptly reversed course.  

The market also reversed right on last year’s Winter solstice! 

Is it possible that the sun controls this market? It would be entirely appropriate for an agricultural commodity!

Some thoughts on the FTSE

The FTSE 100 is going nowhere – and that has been the case mostly since March:

Source: interactive investor. Past performance is not a guide to future performance.

The change in character since the March low is stark. Before, we had a one-direction trend (down). That made it relatively easy to discern the correct direction to trade. 

But since then the waves have been highly overlapping in a zig-zag fashion. That is a recipe for multiple fake-outs – and multiple trading losses from the whiplashes.

That is why I have been quiet in this period, and only a push above the blue trendline could stir up my trading juices a little. But a hard decline from around here would do the same!

Meanwhile, sterling weakness is keeping many balls in the air and that may continue for a while yet.

For more information about Tramline Traders, or to take a three-week free trial, go to www.tramlinetraders.com

John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.

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