By Ron William, CFTe, MSTA

Will the 2023 (Water) Rabbit Hop or Drop?

As starts go, this year has been surprisingly positive, with SPX gaining 6%, significantly outperforming the historical average. Most importantly, it also offered relief from last year’s market carnage, which followed the worst January since the 2008 GFC, warned by a peak-to-trough drawdown of -12%. What next? The January Barometer (JB) seasonality pattern for 2023 will be either of two scenarios: best case, a linear uptrend (+/+), or worst, a volatile cycle and negative surprise into year-end (+/-), as illustrated within our JB scenario matrix in previous FSC blog and interview (Figure 1).

Scenario Analysis

However, over in Asia, where I used to live, a collective population of nearly 2bn recently celebrated their New Year by saying “gōngxǐ fācái,” an expression that wishes “health and prosperity”. Investors are certainly hoping for a second chance for prosperity after the 2022 rollercoaster ride! But will the 2023 Rabbit year hop or drop?

For those less familiar with this ancient timing system, also known as the Lunar New Year, it begins on the second new Moon after the winter solstice. Moreover, it is a lunisolar calendar, based on astronomical observations of the Sun’s position in the sky and the Moon’s phases use archetypal animal symbols to describe the qualitative nature of each lunar year cycle of 12-years (Figure 2).

Traditional Chinese Zodiac

A matrix of five elements are further overlayed; (Wood, Water, Earth, Fire & Metal), so that each year only rotates once in a lifetime, every 60-years; also known as the Chinese sexagenary cycle. Last year I wrote about the “Water Tiger” last seen during the “Kennedy Slide of 1962”. This was earmarked by a 30% decline on DJIA, only to recover after the Cuban Missile Crisis, and served as an eerie historical rhyme to the escalating VUCA landscape. Empirical analysis shows high returns in the Year of the Rabbit and low for the Horse (Figure 3). More in-depth academic studies here.

High Return in Year of Rabbit

The last “Water Rabbit” year appeared in 1963, with SPX jumping 21.5%. However, outlier negative returns still happen, typically across water and earth elements, during the 1903 Rich Man’s Panic and 1939, a time of tremendous economic contraction and uncertainty as the US battled the Great Depression and World War II began in Europe. Another example is the 1987 crash, but during a fire element. This is best reviewed within our heatmap of U.S. equity market returns over the last 100 years (Figure 4). See CLSA analysis for recent examples.

Heatmap Return of Chinese System in Element

Naysayers should temporarily suspend their belief system and simply reflect on these analogues as potential risk scenarios, especially given that our Roadmap model already favors greater mean-reversion risk into H2 2023-2024 (Figure 5).

Composite Cycle Bottom into 2024

On a final note, in Chinese feng shui the Rabbit signifies longevity, peace and prosperity and thus 2023 is predicted to be a year of hope. Onwards and upwards! Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. Welcome more interaction on

Ron William, CFTe Bio

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Ron William, CFTe, is a market strategist and educator/mentor with more than 20 years of experience working for leading macro research and institutional firms, producing tactical research and trading strategies. He specializes in global, multi-asset, top-down framework, grounded in behavioural technical analysis, driven by cycles based on the "Roadmap" signature model of veteran market technician Robin Griffiths, published in his book Mapping the Markets.”

Ron also applies a "market & mind" approach at IntensiChi, using the latest techniques in behavioral-risk models and neuroscience sourced from expert groups. He further supplements with mentoring/coaching, trained by the International Coaching Federation (ICF), and teaches a regulatory approved masterclass in Applied Behavioral Science, with investment, private banks and CFA Societies.

Ron's primary work, as part of his current institutional market advisory firm (RWA), acquired global industry recognition as winner of “Best FX Research” in 2020. Financial media programs and industry publications regularly feature his market insights, including “Is the big cycle about to turn?”, predicting the 2020 crash and alerting the “Minsky paradigm” of 2020 H2-2022.

Driven by high-integrity education, Ron serves as part of the education committee of the International Federation of Technical Analysts (IFTA), Development Director at the Foundation of the Study of Cycles (FSC), Head of SAMT’s Geneva Chapter, and an honorary member of ESTA. He is also a visiting lecturer at universities, active guest speaker for the CFA, CAIA and CISI, and senior teacher at colleges offering an accredited diploma in trading and investing.