Richard Schulz stared intently at his computer screen and noticed that the colorful squiggly lines in the graphic presentation he was contemplating continued to confirm a trend he’d seen before. It was the summer of 2007, and euphoric stock market bulls had just pushed the Dow Jones Industrial Average (DJIA) and other market indexes to near record highs. But Schulz knew the party was over. For weeks, he’d been cautioning those who found their way to his free online investment letter to prepare for a bumpy ride on the downside.
For market-timers like Richard Schulz, calamitous bear markets aren’t the financial disasters they are for most investors. Those who are good at timing the markets often find that it’s easier to make money when market sentiment turns bearish. So, as trillions of dollars in paper assets were vanishing from the stock portfolios of agonized investors around the globe, Schulz’s online newsletter (SchulzOnMarketCycles.com) was reporting a significant increase in value for the exchange traded fund portfolio (ETFP) posted on the site.
After reaching a high of 14,165 points on October 9, 2007, the Dow Jones Industrial Average Began a precipitous 47 percent decline to a low of 7,510 on November 20, 2008. Incredibly, during this same time period, the ETFP posted on Schulz’s website was notching a dramatic 207.2 percent gain. Performance results for the portfolio were posted online for the first time on May 5, 2006. By January 1, 2009, the portfolio was up a robust 325.3 percent!
Timing market moves (short-selling) is not for the fainthearted. Patience and discipline are required, because things sometimes go very badly. An astrologer and self-taught technical market analyst, Schulz draws upon many years of trading experience and relies upon the analytical tools routinely used by insiders in the business. But he doesn’t make a move in the markets without first consulting the technical aspect oscillator (TAO) that he designed to scientifically measure and predict the psychological impact of transiting planets on investor sentiment and, by extension, price moves in the marketplace.
Effectively, the technology systematically analyzes and assigns weighted positive or negative values to selected transiting planetary pairs and generates a raw composite score for any point in time — past or future. 1 When the system is being used to time short-term market moves, Schulz utilizes what he calls the Quick TAO, which tracks market movement on a monthly basis. The system he calls TAO 2 tracks long-term trends and is arrived at by calculating the average between the monthly scores and a mathematical summation of these scores over extended period of time (weeks or months). In Schulz’s market-timing system, the short-term psychological shifts indicated by the quick TAO generate buy and sell signals. The trend line created by the TAO 2 scores show how psychological factors are projected to impact market trends over the long haul.
To put it simply, when the TAO 2 number or score is positive and rising, people’s attitudes and outlook are hypothesized to be the most optimistic. Conversely, when the TAO 2 number is negative and falling, fear and pessimism prevail.
The impressive performance results posted on Schulz’s Web site (SOMC) confirm TAO 2’s utility as a market-timing device. Even more importantly, the technology has emerged as a tool that can be used to scientifically test the astrological premise in a rigorous way. If the astrological premise is viable, and the TAO 2 methodology an accurate reflection of astrological principles in action, one should presumably be able to demonstrate the efficacy of the system — and the validity of astrology — by testing the product’s ability to predict behavioral extremes. Arguably, there may not be a better place to test this idea than in the financial markets, where mood swings fluctuate wildly between giddy optimism and mind-numbing despair.
The evolving TAO 2 technology significantly expands upon concepts and ideas initially introduced by financial astrologer Donald Bradley in the 1940s. To test the veracity of TAO 2, Schulz devised a way to create a moving average 2 for raw TAO 2 scores, which he compares with average price gains and losses for the Dow, the S&P 500, and other financial indexes. Because TAO 2 and the various market indexes are independent variables with known and constantly changing numerical values, they can be compared with each other using the Pearson product-moment correlation coefficient, a common statistical test used to scientifically determine whether a linear relationship exists between independent variables.
The Pearson product-moment correlation generates a correlation value (the Pearson r) between –1.000 and +1.000. An r value of +1.000 indicates a perfect positive correlation, and for tests with more than 100 data pairs (n = 100), any r value greater than +0.30 is statistically significant. Simply, in a series of highly visible tests conducted between January 1, 1999 and June 30, 2008, Schulz demonstrated a statistically significant correlation between the global psychological indications predicted by the TAO 2 system and bullish and bearish stock market price changes.
In the study, TAO 2’s moving average was compared with the DJIA and S&P 500 indexes twice a week on Tuesdays and Fridays. There was a total of 990 data pairings (n = 990) for each of the stock indexes over the 117-month testing period. Convincingly, r values were substantially higher than the r = +0.30 threshold signifying statistical significance. The correlation between the TAO 2 moving average and the Dow Jones Industrial Average was r = +0.72, and for the S&P 500, it was r = +0.81. In both instances, the correlations were statistically significant to greater than one in 10,000 against chance!
It should hastily be noted that correlation is not causation; stocks can and do move against the TAO 2 moving average for indeterminate periods of time. However, what the statistics suggest is an extraordinary connection between the aspect oscillator and stock indexes, which cannot easily be explained away by astrology’s critics.
Results achieved by the TAO 2 technology in this test are hard to refute because the technology blends applied mathematics with astronomy in a quantitative numbers-in, numbers-out type of system that automatically produces raw scores from data input into mathematical formulae. There is, in other words, no subjective human interaction. What’s more, the testing method has been completely transparent, with highly visible TAO 2 average scores projected, charted, and published in advance on the SOMC Web site. Week after week, the test was always about how faithfully reality (activity in the marketplace) reflects what’s happening in the heavens.
As Schulz puts it: “Astrologically, something is going on that asks for continuing and further investigation.”
Is it possible the astrological community finally has a scientifically plausible measuring device capable of producing the sort of objective proof that is powerful enough to convince skeptics and be a game-changer in the court of public opinion? Schulz describes the system’s current state of technological sophistication as having barely progressed to the Model T Ford stage, but he thinks rapid progress is possible now that the system’s formulation has been programmed and added to the professional research software package commercially available from Cosmic Patterns Software, Inc. of Gainesville, Florida.
A long-rime resident of Libertyville, Illinois, Schulz was introduced to astrology in the early 1970s; he initially studied with Chicago area astrologers Doris Hebel, Irene Diamond, and Christine Rechter and later with the Ebertin School of Cosmobiology, Manik Chand Jain of the Vedic tradition, numerologist Kevin Quinn Avery, and astrologer Charles Jayne. Schulz is an amateur astronomer and meteorologist who has taught astrology at the community college level. And he has an undergraduate degree from Southern Illinois University and a master’s degree in Psychiatric Nursing from California State University in Los Angeles. In graduate school, his master’s thesis described a positive significant correlation between lunar cycles and the rise and fall of medication dosages administered to patients in a Veterans hospital.
Schulz’s formal education has included a heavy load of science, mathematics, and psychology, but his fascination with business and financial astrology is long-standing as well. Over the years, his primary research goal has focused on refining and advancing the work Donald Bradley began years ago. Like TAO 2, Bradley’s Siderograph was designed to use astrological principles to predict cyclical market activity. Schulz became excited about the technology after evaluating results published by the author in his book, Stock Market Predictions, for the year 1946. However, he wasn’t able to replicate Bradley’s results (find similar correlations) for other years, and disappointment related to this failed effort morphed into what became a 25-year odyssey to find a better way to develop the technology.
Like Bradley’s Siderograph, TAO 2 features an aspectarian that assigns positive or negative numeric values to every degree of planetary separation. However, major technical differences between the systems have emerged over time. For example, Bradley’s aspectarian uses all of the planetary aspects forming in the heavens at any given time; TAO 2 has evolved into a system that uses nine selected planetary pairs, primarily involving the planets Mars, Jupiter and Saturn. Also, Bradley assigned subjectively derived values to conjunctions, which Schulz came to view as a serious methodological flaw. To enhance the usefulness of TAO 2 as a scientific measuring device, Schulz made a commitment to develop it as a system that used angular separation between planetary pairs as the sole data input, beginning with zero degrees of separation (the conjunction).
In another major breakthrough and departure, Schulz was able to build TAO 2’s aspectarian using harmonic theories introduced by British astrologer John Addey. In Schulz’s interpretation of harmonics theory, positive aspects are derived from the first three harmonics of the number three — the semi-sextile (30°), sextile (60°), and trine (120°). Stressful aspects derive from the first three harmonics of the number two — the semi-square (45°), square (90°), and opposition (180°). The TAO 2 aspectarian is solely based on the numbers two and three and their harmonics, which are logarithmically weighted to be mathematically and logically consistent. Simply put, TAO 2’s success as a predictive tool means that traditional astrological aspects apparently work as they’re suppose to work according to ancient theories.
Schulz was also able to incorporate into the system innovative concepts pioneered by Sherman McClellan, the technical analyst, mathematician, and statistician who invented the McClellan Oscillator and Summation Indices as stock market analytical and trading tools. Like McClellan’s oscillator, TAO 2 is “zeroed” so that, for any given period of time, the summation of all the raw scores equals zero. The complicated math involved in this step isn’t easily explained, but the end result is easy to visualize.
Picture a simple chart with a horizontal zero line located halfway up the perpendicular axis. Based on what’s happening in the heavens, the graph of the TAO 2 aspectarian (its moving average) can be observed arching above or below the zero line in a curvilinear fashion. In Schulz’s experiments, when the scores have been above the zero line for weeks or months, the global investment psychology has been positive or bullish. Conversely, whenever it has moved below the line for similar periods of time, market sentiment has turned decisively bearish.
Getting TAO 2 to produce reliable results has been no easy task. It took many years of grinding effort — and several Eureka moments — to move the technology along to its current level of sophistication, including inspiration from unexpected sources. For example, Schulz credits the contrarian sentiment indicators that became popular in the 1970s and ‘80s with providing motivational impetus. The contrarian sentiment index is created by polling investors to learn their opinions about whether the market is headed up or down. According to contrarian thinking, the point at which positive investment sentiment is peaking (a preponderance of investment gurus are optimistic about the future) is when the contrarian factor supposedly kicks in and the market tanks. Similarly, the experts supposedly get it wrong on the downside as well, with strong periods of recovery frequently occurring when pessimism prevails.
Schulz struggled with the idea that the experts could be as consistently wrong about the markets as contrarian logic suggested they must be. But it was also clear to him that, by emphasizing the push and pull of psychological factors, contrarians seemed to be onto something. From a psychological perspective, cyclical trends in the market are observed to be moving from positive to negative in the same way that astrological aspects move from trine to opposition and back. Schulz resolved to build a more accurate tool for predicting the psychological impact of transiting planets, not only on mysterious cyclical trends in the financial markets, but on other natural world phenomena as well.
The fact that TAO 2 correlates with global stock indexes makes it useful in a tangible way, but the technology can also be used to effectively test astrological assumptions in other ways. For example, researchers might look for correlations between the psychological predispositions predicted by TAO 2 technology and the decisions made by government leaders in times of crisis or natural disasters. Or, more frivolously, they might check to see whether correlations exist between the rich and famous (or other groups) and their TAO 2 scores at birth. Schulz speculates that astrological researchers who use the technology will also be able to examine theories related to transits, progressions, and directions to sensitive angles in the birth chart.
The possibilities, he believes, are practically limitless.
(Reprinted from The Mountain Astrologer magazine)
1. In statistics, a raw score is the number obtained directly from the measuring instrument before it is tested or transformed in any way; it is any number as it originally appears in an experiment.
2. A moving average is an indicator showing the average value of a security over a set period of time. It is continually changing or moving (up or down) as new historical or sequenced data is added to and impacts the average over time.