The planet Mercury has been in retrograde motion since June 26, and astro-traders have been keeping a close watch on the effects of this cosmic phenomenon on the market action.

MERCURY RETROGRADE CAUSES TROUBLE

The astrological tradition says that Mercury retrograde periods are times when plans go awry, communications get confused, and negotiations break down. When Mercury is retrograde, it’s not a particularly favorable time for starting new ventures, traveling, or signing contracts.

WHAT IT MEANS FOR MARKETS

And, in the markets we often find that Mercury retrograde periods bring errors in trade execution, misinterpreted technical indicators, and other mistakes in analysis, timing, or money management.

WATCH THE PATTERNS

While some astro-traders prefer to step aside from active trading and avoid the markets altogether while Mercury is retrograde, paying attention to Mercury retrograde cycles is an effective strategy for tuning in to the powerful ways that planetary dynamics connect with patterns of price and time in the markets. In many cases, too, Mercury retrograde periods coincide with trend reversals or with short-term counter-trends in the context of broader market moves.

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Figure 1 Caption: This chart for the Hong Kong Hang Seng index shows the way that Mercury retrograde stations (marked “Rx” on the chart) often coincide with short-term price reversals in the market.

IT MOVES FAST

While all the planets have measurable impacts on trading dynamics, Mercury’s effects are particularly interesting because it’s a fast-moving planet. Its annual motion through the zodiac puts it into retrograde motion about three times each year, which means that we have lots of iterations of the Mercury cycle to examine in our back-testing of its relationship to individual markets.

Having enough empirical data to work with gives us a distinct advantage in using the repeating cycles of this planet in developing forecasts and trading strategies, so we can employ the astro-trading advantage with much more confidence when we enter the markets.

KEY FACTORS TO CONSIDER

Mercury retrograde cycles have several key components. To begin with, Mercury as seen from the Earth’s perspective begins to slow down in its forward progress through the zodiac. Then it stops and reverses direction, a phenomenon known as a Mercury retrograde station.

After its retrograde station, Mercury continues in its apparent backwards motion for about three weeks. Then it slows down again and stops one more time at its direct station, bringing an end to the Mercury retrograde period as it resumes forward motion.

Many astrologers conclude their considerations of the Mercury retrograde cycle at that point. Since the period when Mercury is retrograde is so often accompanied by problematic situations, the Mercury direct station is seen as a time to catch our breath and get back to business as usual. With the Mercury retrograde period at an end, it may even be a legitimate time for celebration.

But astro-traders who focus on the Mercury direct station alone risk ignoring an important final phase of the overall Mercury retrograde cycle. This often-forgotten component is the period between the direct station and the Mercury retrograde return, the time when Mercury comes back to the point in the zodiac where it originally went retrograde at the beginning of the cycle.

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Figure 2 Caption: This chart of recent trading action in the S&P 500 illustrates the various components of the Mercury retrograde cycle. The red lines on the chart depict the ongoing movement of Mercury, which typically moves rapidly through the field of the chart. But when Mercury began to slow down (A) prior to its recent retrograde station, the price action became more congested as an attempted rally failed. When Mercury made its retrograde station and began moving backward (B), there was a change in trend and the S&P began a fresh rally. This phase of the cycle ends when Mercury makes its direct station at (C); the “forgotten” part of the Mercury retrograde cycle is between (C) and (D), the point of Mercury’s retrograde return. After that, Mercury will resume its typical speedy passage through the chart.

SHINE A LIGHT ON THIS TIME

This final part of the Mercury retrograde cycle, which is sometimes referred to as Mercury “coming out of its shadow,” is an especially useful time to pay attention to the action in the markets. While different markets respond to this forgotten part of the Mercury cycle in distinctly individual ways, in many cases this is an extremely dynamic period of significant price movements, providing excellent opportunities for savvy astro-traders.

For example, when Mercury makes its direct station on July 20, it enters this final phase of the complete retrograde cycle, which will last until the retrograde return on August 3. Mercury went retrograde on June 26 in Cancer, which is one of the zodiac signs associated with the water element. This is a critical correlation, since individual markets behave in different ways during this portion of the Mercury cycle, depending on which zodiacal element Mercury was in when it went retrograde– fire, air, earth, or water.

The book Mercury, Money and the Markets provides a detailed analysis of a variety of global markets and individual equities, based on extensive back-testing of price trends associated with previous Mercury retrograde cycles in their trading history. With this data in hand, it’s a simple matter to identify the specific trading opportunities that offer the highest probability of profitable price moves.

ASIA AND PACIFIC MARKETS

When we look at the seven-day period immediately following previous Mercury direct stations when the planet has gone retrograde in a water sign, we note that a number of Asian and Pacific markets have an especially high potential for positive price moves during that time. In Hong Kong the Hang Seng index shows a 68.8% likelihood of higher prices during this time frame; the Tokyo NIKKEI 225 a 65.0% probability; the Singapore Sraits Times index 66.7%; the Jakarta Composite index 70.0%; and the Kuala Lumpur Bursa Malaysia index 80.0%.

LATIN MARKETS

Latin American markets also tend to react favorably when this final part of the Mercury retrograde cycle takes place in water signs, with the MERVAL Buenos Aires index showing a  70.0% likelihood of higher prices, the Mexican Bolsa IPC index an 80.0% likelihood, and the Sao Paolo Bovespa an 83.3% likelihood.

BULLISH EDGE FOR METALS

Traders in precious metals should also watch the market action closely with this part of the Mercury cycle in play in water signs, since Gold has a 61.9% chance of higher prices and Silver has a 65.2% likelihood.

In Frankfurt and Amsterdam, however, the expectations are less bullish, with these stock market indices showing only a 57.1% likelihood of higher prices. London’s FTSE 100 and Tel Aviv’s TA 100 only show a 50.0% likelihood of higher prices during this part of the Mercury cycle.

Individual equities also demonstrate remarkably different responses to this part of the Mercury cycle. It’s bullish for AA, AXP, BAC, HD, and INTC, but bearish for DIS, DD, JPM, KO, and PG.

REDUCE YOUR TRADING RISKS

The bottom line is that by selecting a particular market to trade, and then studying the previous behavior of that market while Mercury has been retrograde, an active astro-trader can substantially reduce trading risks. And since Mercury goes retrograde quite frequently (the next times are on October 21, 2013 and February 6, 2014), there are plenty of opportunities for trading profits, too!

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Related Reading:

Five Myths about Trading with Mercury Retrograde

Financial Astrology: Market Timing with the Stars

Financial Astrology Can Boost Your Trading Results