The really good news is that right here, right now, at this very moment, it is raining right here in California. Mind you, this is April, a mere 17 days after the Spring Equinox.
Coincidentally (or not), the market is enjoying another day of green. I parenthetically say “or not” because last night I read an analyst who discussed the current market in Gann terms, which means, of course a discussion of geometry, astronomy, and astrology, and ancient mathematics.
- Gann figured out that financial markets correspond to the orbit of the earth commencing with the Spring Equinox. He also figured out that markets change at certain times of the year with the highest probability points being the seasonal change point. Of course, this all lines up geometrically.
Rarely is it my goal to rain on any one’s parade, so I won’t do it today (even if it is raining here), but I will say that it is an interesting concept to predict market movement based on the seasons. Actually, Gann Theory is more than just market forecasting based on the seasons; it correlates more to seasonal mass moods, sentiment if you will.
- But the real reason it changes and perhaps people aren’t clear on this is the fact that sentiment of the mass crowd psychology also shifts around these dates.
Now, this is something one can sink teeth into – herd mentality with the mass thinking (feeling) coming from somewhere other than an external human source. I qualify the source with “human” because Gann suggests that the market movement comes from an external source – the physics of the Multiverses.
Gann Theory is fertilizer for good conversation, but in actuality, like most hypotheses (it is not an actual theory), it is not something you want to rely on, especially in these days of computers, high-frequency trading, heuristics, and dark pools. It might be true that many a folk feels depressed in winter and sells off the family farm, but, overall, the market is not driven by mood of the masses; it is driven by folks with high-powered tools and access desiring to make money, lots of money, and in that process, surely, they bet for and against the mood of the people, but, mostly, the objective, cold, dispassion of the computer decides what to buy and when on a very large scale.
And the computer decides to buy or sell on what humans program it to do, such as look for a technical opening, no matter how narrow. But humans also program their computers and they tell their brokers to buy or sell based upon the economic fundamentals, such as the labor market, consumer spending, retail sales, and corporate profit. The latter, of course, being the strongest driver of the market, ultimately.
Yet, to get to that, corporate profit, one has to bet on the future, meaning, one follows a trail that will lead to corporate profit, and that trail is littered with sign posts, such as the labor market, consumer spending, and retail sales. Each of those is a portent of things to come, a metric by which investors can assess the future. Right now, labor is the driver, as last Friday’s report on such showed only 126,000 jobs created in March, yet …
- U.S. job openings surged to a 14-year high in February, a sign that the labor market remains on a solid footing despite a sharp slowdown in job growth last month.
And there you have it, Mr. Gann. Seasons do affect the market, perhaps, though, just not in the direct way you suggest. In this case, an exceptionally harsh winter did slow the market down because it shut down roads, forced folks into their houses, and it forced businesses to shut down. Oh, dang, the longshoremen strike in Southern California (one of the busiest ports in the world) also added to that slowdown as goods from all over the world sat idle in crates on the dock until the strike finally settled.
The labor data will change, and it already is, as spring lights up the day and the market, well, at least for today anyway, and as the labor reality changes, so will the lead-in to corporate profits. The sign posts point to a stronger spring and summer, as more folks are working with more money in their pockets.
As well, another non-mathematical influence on the market today (looking to the future) is the reality of what corporations are doing with their profits, and the cheap money the Fed has made available for the last five years.
- After a record year by value and deal count in the US during 2014, M&A activity in the first quarter of 2015 increased 11.6% compared to Q1 2014 with US$ 317.9bn-worth of deals
So, it is raining today, in the spring. I feel good, and so does the market. Is the reason for the market moving into the green a second day in a row the rain in the western part of the US makes folks feel like buying, or is the mathematical probability associated with mass sentiment due to the position of the earth?
Far be it from me to totally discount Gann’s hypothetical reasoning, as I understand Hamlet was right …
“There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.”
Alas, though, I am a simple thinker, meaning, philosophically speaking, more often than not, the simplest explanation is the one that is right. Thank you, Mr. Occam.
Trade in the day; invest in your life …
