# Phases of the Moon, from Victor Niederhoffer

April 28, 2008 |

In considering the phases of the moon I found the following two passages partially illuminating:

"Considering the moon as a circular disk, the ratio of the area illuminated by direct sunlight to its total area is the fraction of the moon's surface illuminated; multipled by 100 it is the percentage illuminated. At New Moon the percent illuminated is 0; at First and Last Quarters it is 50%; and at Full Moon it is 100%." Source

"When a sphere is illuminated on one hemisphere and viewed from a different angle, the portion of the illuminated area that is visible will have a two dimensional shape defined by the intersection of an ellipse and circle where the major axis of the ellipse coincides with a diameter of the circle; if the half ellipse is convex with respect to the half circle then the shape will be gibbous, bulging outwards, whereas if the half ellipse is concave with respect to the half circle then the shape will be a crescent." Source

The explanations made me start thinking of the angle of incidence and the angle of reflection, and the % of the time that a market is above zero and below zero, and other concepts engendered by the phases of the moon.

I wonder what other ideas about markets are generated by considerations such as the above. Also, a layman's proof of the ellipse/circle statement might be helpful to speculation.

## Jim Sogi writes:

Speaking of moon effects, there is one of Vic and Laurel's classic penumbras forming off the 1400 round in S&P off this recent high.

Also, the other image I got is the kids playing jump rope with a kid at each end spinning the line around. There is a definite drift to the spin in one direction, but one can play the spin until tapping out or whatever they call it. Its definitely tradeable though may or may not show on radar of a fixed wavelength. The game is different at the bottoms than at the tops for sure. Do kids play this game anymore?

Reminds me of earnings season. First Alcoa, then a handful of others. The first sliver of the waxing moon. As the days pass, the number of companies reporting earnings steadily increases until a full globe of information illuminates the markets. Hunting/gathering levels peak just as the flow of earnings begins to dissipate. Next comes the struggle for survival on diminishing resources as the moon wanes into oblivion. Only the strong will survive the dark days until the cycle begins anew.

## Phil McDonnell enlightens:

The side of the Moon facing the Sun always looks like a circle from the perspective of an observer on the Sun. The simplest way to understand how the shape of the visible lighted portion of the Moon changes is to view the circle of light as a rotating circle. It is well known in mathematics that a circle rotating on a North South axis will appear as an ellipse in general. It will only be a true circle when viewed full on.

From the perspective of a viewer on Earth the circle of light on the Moon is rotating once every 29.5 days. So from the Earth perspective the line between day and night on the Moon will generally be visible as an ellipse because it represents the edge of our rotating circle of light. However the lighted edge of the Moon is still circular at all times so the edge of the lighted portion will always be described by a circle. Thus the combination of one edge bounded by a true circle and the day-night line of demarcation by an ellipse will always be true.

To understand the convex concave claim we need only consider the ellipse formed by our North South rotating circle. When the Moon is exactly half full corresponds to when the circle is rotated by 90 degrees and faces us edge on. At this time the ellipse appears to collapse to a straight line because the circle is edge on. This is what happens at first quarter and last quarter Moons. During the Gibbous phase the ellipse will appear convex from Earth because what we are seeing is the convex portion of the lighted ellipse. Similarly during the crescent phase (either waxing or waining) the visible ellipse will be the concave portion of the lighted circle.

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1. George Parkanyi on April 28, 2008 11:11 pm

When I was in Australia in 1985 on a satellite launch, I was sitting on Sorrento Beach one night in the northern part of Perth, smoking a cigar and looking at the full moon.

As I was gazing at it, I suddenly realized that the light and dark shading on the surface makes a perfect Yin-Yang symbol - but only in the Southern hemisphere because of the look angle. “So that’s where the Chinese got it from!” I thought excitedly.

The symbol represents interconnectedness in the sense that two opposites are really part of the same thing. There is no doubt that the stock market is cyclical, and that the seeds of the next bull move are sewn during the down cycle and the next bear in the up cycle. Each has its opposing forces, and they are inter-connected.

The problem for traders is that periodicity and amplitude of these cycles are not constant, so we spend a lot of time trying to predict when and how far, and what gives us the most trouble is trying to determine where we are in the cycle NOW.

What if now didn’t matter? What if you could build a trading method around only the information THAT the market is cyclical? If you don’t have to worry about when - by extending your expectation time frame, then you just need to determine how much of the cycle in either direction is useful to you, and work with that.

If you’ve accepted that you’re not going to worry about when, then it gives you a more focused framework within which to look for opportunity. For example, of you want more cyclicality within a given time frame to increase the quantity of useful “cycle-bits”, then your time would be well spent seeking out volatility (and durability - you don’t want the elastic band to break). You may also want to consider contingencies at for different phases of the cycle, and/or stagger your deployments in time.

These are things that can be discerned from the moon.

Cheers,
George

2. George Parkanyi on April 28, 2008 11:45 pm

Speaking of cycles, one book that profoundly changed my outlook on life sometime in the early 80’s (I began to look at life and nature through the lens of cycles rather than linear progression and a whole lot of science I took in university suddenly made a lot more sense) was “The Cycles of Heaven - cosmic forces and what they are doing to you” by Guy Lyon Playfair and Scott Hill. Souvenir Press, 1978. ISBN 0 285 62335 4

It makes a lot of very interesting scientific connections that I believe could be useful to traders. At the very least its thought-provoking.

Cheers,
George

3. Craig Bowles on April 30, 2008 11:06 am

George’s book sounds interesting. Climate and the Affairs of Man by Browning/Winkless is my favorite. 2008 is the most direct angle in 92 years for the sun and moon lining up with the earth. The next decade has 3 or more lunar or solar eclipses in the majority of the years. NASA has the data going back to 1900 and financial market problems normally coincide. The last 3 or more was the two years early in this decade when we had the last recession. Like 1906 3 solars didn’t just trigger the San Fran earthquake but increased volcanic activity before the 1907 financial breakdown. Browning says the alignment is a trigger for earthquakes and volcanoes with the latter affecting climate and causing less money to be available for discretionary items. The alignment is dangerous near year end when the earth is closest to the sun, so 2008 has that going for it. He says the New Madrid fault is due. The University of Michigan did a study on the moon phases in 2001 but it was easy to miss as we were pretty preoccupied at that time. The web address is: http://216.109.125.130/search/cache?ei=UTF-8&p=lunar+cycles+affect+financial+markets+2001&y=Search&fr=yfp-t-501&u=www.bus.umich.edu/pdf/mitsui/workshopdocs/ZhengMoonstruck.pdf&w=lunar+cycles+cycle+affect+affects+financial+markets+2001&d=e9PgejWxQihf&icp=1&.intl=us

4. James Brooks on May 7, 2008 5:30 pm

George and Craig, Thanks for the recommendations on the books. I have just ordered both of them. I believe there is a link between the cyclical movement of the markets and the moon. Thanks, Jim