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dgmodel

Stars and Stocks...

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SPECIAL REPORT:

You may have heard of the old commodity trading saying, "buy the new moon and sell the full". It may be good advise for some commodities like beans and greens and corn bread, but for trading S&P's or OEX options this year, it hasn't been worth a flip. Why? Because so far this year any trading day that also happened to be the full moon, has closed Positive 83% of the time. So much for old commodity trading sayings, huh? Well, not really. Like most things in the markets there is another side of the story. So we asked our computers to give us some additional information on trading during a full moon. Here are the results.

So far this year we have had 10 full moons. Only two fell on a weekend so we used the following Monday as the "full moon day". We asked the computers to look for any patterns on the 3 trading days before a full moon day, and (since everyone wants to buy an option, hold it for a week, and hit a home run) on the 5 trading days after a full moon day. What we found is very interesting.

As you learned above, full moon days close up 83% of the time. AND that is the worst day to be short, as the average drop on a full moon day is only 20.10 points on the Dow. BUT, shorting before the full moon does much better. The average cumulative drop during the three days BEFORE a full moon trading day is 90.40 points. That's the equivalent of over 10 points on the OEX. AND, the best day of the three to be short, or in puts, is the day BEFORE the full moon, which averages dropping 35.20 points.

BUT, if you really want to go for a big lick in puts, study this. The average cumulative drop in the week (5 trading days) after a full moon is 168.80 points. That's 19 points on the OEX and not bad for a weeks work. The best day to be short is the THIRD day after the full moon trading day, which averages dropping 72.50 points. The second best day to be short is the FIRST day after the full moon trading day, which averages dropping 35.60 points.

Now before you start thinking that this full moon stuff is a bunch of bull, tell us how much and on what day was the biggest one day drop in 1996 (so far). We'll even give you a hint. Elaine Garzarelli had nothing to do with it. While your at it, tell us how much and on what day was the biggest one, and two day drops in 1995.

Give up? The biggest one day drop in 1996 was -216 points on March 8. It was the THIRD day after the full moon. The biggest one day drop in 1995 was -133 points on July 19. It was the fifth day after the full moon. The biggest two day drop was that day and the day before, the fourth day after the full moon when the Dow dropped -58 for a total two day drop of -191 points.

Of the 15 biggest one day drops in 1996 so far, 11 of them were within the time frames examined by our computers during the full moon each month. Ten of them fell in the "week" after the full moon. If we ignore the Garzarelli sell off days that means that only 2 of the biggest drops this year have NOT been during a full moon. Making 10 out of 13 of the biggest drops hitting after the full moon. All other things equal, we know of no better time to be holding puts.

Only once in the past year has holding puts right after a full moon not worked very well. That full moon was also a Blue Moon proving once again that that old saying of "once in a Blue Moon" really is something unusual.

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