The Ides of October
Beware!
Julius Caesar was warned to beware the Ides of March, but did not take sufficient heed. Our financial markets have a propensity to exhibit extreme volatility around the Ides of October which is on the 15th of the month, so should we not be taking heed of this auspicious event? Originally the Ides were determined by the moon’s cycles, reflecting the lunar origin of the Roman calendar. This month the full moon is on Sunday the 9th and the New Moon on the 25th.
Knowledge of stock market history can be as much a hindrance to success as a help. The market never does anything exactly the same way, as Mark Twain was wont to remind us, but I still feel inclined to share some observations relating the current situation to past October crashes, made by Robert Prechter of Elliott Wave Theorist.
Timing comparison to the 1987 crash
1987: Rebound rally topped on 2nd October; indexes held up into 5th October; gapped down on 6th October.
2022: Rebound rally topped on 5th October; indexes held up into 6th October; gapped down on 7th October
1987: The crash lasted 2 weeks until 19th October / 20th October
2022: If stocks repeat that duration, they will be falling until 20th October / 21st October
Emotional markets (and there is a lot of emotion going around right now isn’t there?) often co-ordinate with lunar phases
1987: The market gapped lower 1 trading day before the full moon 7th October
2022: The market gapped lower 1 trading day before the full moon on 9th October
1929: The crash ended 11 calendar days after the full moon that occurred on 18th October
2022: A full moon occurs on 9th October. Eleven calendar days later is 20th October
1987: The crash ended 2 trading days before the new moon of 22nd October
1929: The crash ended 3 trading days before the new moon of 1st November
2022: The new moon occurs on 25th October: 2-3 trading days earlier is 20th October / 21st October
Terminal phase
1929: The sharpest part of the decline occurred in the final 5 trading days
1987: The sharpest part of the decline occurred in the final 5 trading days
2022: The final 5 trading days are due in the week of 17th / 21st October.
In Elliott Wave terminology we are in the third wave down of a third wave down of larger degree. Third waves tend to be the most dramatic and to add a bit of spice, as if it were needed with the current crop of known unknowns (Ukraine, Russia, China, energy “policies”, OPEC cuts, Nord Stream pipeline and Crimea bridge explosions, LDI and the seizing up of the gilt market, Credit Suisse, Nomura and interest rate derivatives, continuing dollar strength, rising US Treasury yields, global GDP falling, recession warnings, I could go on…) 21st October is also options expiry day.
Beware the Ides of October…