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Foundation for the Study of Cycles is registered as a 501(c)(3) non-profit organization. Contributions to the FSC are tax-deductible to the extent permitted by law. The Foundation’s tax identification number is 83-2540831.
The Foundation for the Study of Cycles is a nonprofit research and educational institution dedicated to the interdisciplinary study of recurring patterns in all areas of research. Your generous donation supports continued research for the betterment of our world.
Foundation for the Study of Cycles, PO Box 177, Floyd, VA 24091
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Foundation for the Study of Cycles is registered as a 501(c)(3) non-profit organization. Contributions to the FSC are tax-deductible to the extent permitted by law. The Foundation’s tax identification number is 83-2540831.
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The Foundation for the Study of Cycles is a registered 501(c)(3) non-profit educational institution. Your contribution is tax-deductible to the extent permitted.
Donate by Mail
Foundation for the Study of Cycles, PO Box 177, Floyd, VA 24091
Tax information
Foundation for the Study of Cycles is registered as a 501(c)(3) non-profit organization. Contributions to the FSC are tax-deductible to the extent permitted by law. The Foundation’s tax identification number is 83-2540831.
One of the most seductive ideas in all of cycles research is that there exists some simple, mechanical way to extract profits from markets. Learn the pattern, follow the rule, enjoy the returns.
I have been around these pitches for the better part of twenty-five years. I have never once found a simple mechanical system that reliably produces market profits. Not one. I have tested many, and I have watched a great many more tested by people far more motivated than I am to have them succeed. They do not hold up.
That is not cynicism. It is data.
A recent example has crossed my desk more than once. It is a study, reportedly authored by RBS, that claims a simple lunar-phase strategy dramatically beats the market — buy on the new moon, sell on the full moon, and, in its own words, "enjoy your profits." It has the imprimatur. It has the letterhead, the charts, the decades of data. It looks entirely legitimate. It is exactly the kind of thing that gets forwarded around with a note that says, "Have you seen this?"
So I put it to the test.
We rebuilt the strategy and ran it against decades of data across five major indices — the S&P 500, the Hang Seng, the DAX, the Euro Stoxx 50, and the CAC 40. What we found was nothing like what the paper claimed.
The published report shows the moon strategy returning, on average, more than six times the market's gain. In our testing, both halves of the lunar cycle underperformed simply holding the index — on every single market. Worse for the paper's central claim: it says the new-moon-to-full-moon leg is the winning one, and in our data that ordering reversed on four of the five markets we could test. Pooled across more than four thousand trades, the supposed edge came out with the wrong sign entirely.
Here is a side-by-side of the paper's headline against ours:
RBS paper (avg. of the “winning” leg
Our replication (5 testable indices)
Strategy vs. index
645% of index gain
22% of index gain
"Winning" leg holds?
Yes, on all six markets
Only on the S&P 500
Both legs vs. buy-and-hold
Strongly outperforms
Underperforms everywhere
That is not, by the way, a 22% improvement on the index returns. That is 22% of the index returns, i.e., 78% less than what the index returned. I am not going to tell you this is the final word, but I tested this hard, and I have high confidence in what I found. It is also entirely consistent with what I have found every other time I have rigorously tested a "sure thing" that seemed too good to be true.
It falls apart. And in this case, it was so bad I dug deeper to find out if this really was an RBS paper and found that it is more likely a “deep fake” than anything legit. If you go to the LinkedIn page of the study’s author and click on the link to the supposed publication it doesn’t take you to the study page but to a “casino astrology” page.
And that brings me to the question this exercise raised for me all over again: Why do we really study cycles?
If the answer were "to find a mechanical edge in the markets," I would have quit a long time ago, because in twenty-five years I have never found one, and I no longer believe one exists in the form these studies keep promising.
That is not why I do this. And it is not, I think, why any of the serious people in our community do it either.
We study cycles because they are one of the few real handholds we have on how reality is actually ordered – on the deep regularities beneath markets, biology, climate, and history. The purpose is not to find an easy way to beat the tape. There are no easy ways to beat the tape. The purpose is to do the genuinely hard work of understanding the world as it is, and then to use that understanding to build things that last: institutions, portfolios, communities, ways of living that are aligned with reality rather than fighting it.
That is a slower and less glamorous promise than "enjoy your profits." It will never be forwarded around with the same excitement. But it is true, and it is durable, and it is the work I want the Foundation for the Study of Cycles to be known for. And if you do the hard work of understanding, you might just beat the tape too.
The next time a sure thing lands in your inbox, test it. You will learn something either way. And on the rare occasion something survives the testing, you will have found something real — which is worth infinitely more than something that merely looked real.
Dr. Richard Smith
FSC Chairman of the Board and Executive Director