When the moon is full, the gravitational pull of the moon and sun are combined. Hence, the full moon exerts a powerful pull on the Earth.
The “lunar effect” whether real or imaginary, has no scientific evidence to back the claim of its impact on animals, humans and/or the stock market.
Regardless, reports of increased “lunacy” (Luna in Latin means moon) around the full moon are well documented.
Given the market’s near certainty of an interest rate hike when the Fed meets this week, last Friday the dollar declined and interest rate yields softened. (Incidentally, the ETF coverage from last week that follows the commentary mentioned several times my negative bias on the dollar.)
All the major macro data that has come out recently shows modest growth for the economy. However, expectations continue to outweigh the stats.
The fuzzy full moon in the photo represents the fine line between collective consciousness and scientific fact.
Regarding the market, we surely witness our fair share of a fuzzy moon. On the one hand, we see an overall weakening in market breadth. The Russell 2000, for instance, confirmed a warning phase.
On the other hand, the Nasdaq 100 closed near its recent all-time high.
Lunacy in the face of modest growth?
To repeat the sentiment about the the Modern Family, they will not find the same level of optimism as tech and Nasdaq until tangible policies are introduced.
Nevertheless, lunar effect of not, Transportation, after testing the 50 daily moving average, on Friday returned to a Bullish Phase. Should IYT remain above the 50 DMA, that could have its own powerful pull on the market.
The drop in the U.S. dollar will also impact the gravitational pull. Considering last week’s percipitous drop in metals, energy and the softs, many low risk buy opportunities could emerge this week.
If so, I see two positive implications. First, just that-low risk buys-my favorite.
Secondly, a win-win for the economy provided inflation can remain in check while the economy continues to modestly grow. Then, the Fed gets to do its long-overdue thing and feel good about it.
