Trading the Pluto Retrograde Station

April 1, 2010

Flip a coin.

It will come up either heads or tails.

In fact, there's a 50/50 chance of either outcome. It's a clear-cut binary decision; the coin has only 2 sides, and there's an equal chance of either side landing up with any coin toss.

Odds of 50/50 may be wonderfully fair and egalitarian, but they're not good enough for us as astro-traders. Like W. D. Gann and other successful astro-traders, we want the odds to be in our favor, and even a small advantage-like a 55% chance of an outcome in our favor-can be enough to allow us to make a decent living in the markets, provided that we are willing to trade prudently and capitalize on that slim percentage working for us.

Retrograde stations of the planet Pluto provide a good example. This slow-moving outer planet spends a lot of its time in retrograde motion, but its retrograde stations-the times when it shifts from direct motion to appearing to go backwards through the zodiac as seen from the Earth's perspective-come only once a year. For the past 25 years or so, they have taken place annually some time between early February and early April.

How do these Pluto retrograde stations impact the stock market?

About 58% of the time the S+P 500 goes up immediately following the station. That's better than a coin toss-it's a tradable advantage, if you manage it properly.

But, as with any average results, the specific outcomes may vary widely from what the simple statistic would lead you to expect.

In 2009, for example, the Pluto retrograde station sent the S+P 500 down by about 0.33% on the trading day immediately after the station. The same result had characterized the Pluto station during the year before that.

The biggest losses during the last quarter-century were in 1984, when the S+P 500 dropped by 1.50% on the day after the station, and in 2002, with a drop of 1.60%.

By contrast, the S+P rose by 0.75% in 2006, and by 2.63% in 2000. But even though the S+P 500 is more likely to rise than to fall immediately after a Pluto retrograde station, the losses on average tend to be slightly larger than the average gains.

If you're trading Gold, however, there's a slightly different story. The odds of Gold going up immediately after a Pluto retrograde station are slightly higher (about 59% of the time), and when Gold does go up on such occasions the average gains are larger (1.77%) than the average losses (1.06%) when they occur. In a couple of recent years the gains have been fairly spectacular (4.17% in 2006 and 4.21% in 2008).

The Tokyo Nikkei Index responds even more strongly to Pluto retrograde stations-it has gone up more than 73% of the time on the days following the stations, with gains as much as 12.53% and losses as big as 6.48%.

Should you trade the Pluto retrograde station? That's up to you. But if you're considering it, be sure to back-test the market you are trading. Find out first if the odds are in your favor, and then be ready to manage your trade accordingly.

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