AUTUMN EQUINOX

For some reason, stocks, commodities and currencies have a curious
tendency to make major tops or bottoms on this day, as Paul Macrae
Montgomery points out in a special study edition of Universal Economics
newsletter entitled, "A Date Which Will in Infamy." While it is a bit of
hyperbole to equate Sept. 22 with FDR's characterization of the Dec. 7,
1941 attack on Pearl Harbor, the number of huge reversals that took
place on or about that date is stunning.

Montgomery recalls living through the October "massacres" of 1978 and
1979, the crash of 1987, the mini-crash of 1989, the 1997 Asian collapse
and the Long-Term Capital Markets plunges, which started to cascade
downward in late September. And while gold bullion topped in January
1980, gold stocks made their highs on Sept. 22 of that year, he adds.
That date also saw the peak in many oil stocks.

Why the apparent coincidence of these market upheavals beginning around
Sept. 22? Montgomery posits a possible link to the Autumnal Equinox,
which takes place Tuesday afternoon in the Northern Hemisphere. And he
also observes an increasing incidence of market reversals around the
time of Vernal Equinox in the Spring.

This year's Autumnal Equinox comes after a historic six-month rally in
stocks and a persistent, if much less dramatic, drop in the dollar, he
says. Traders should be alert for reversals in stocks, currencies and
gold for possible reversals, Montgomery advises. Long-term position
accounts shouldn't act without corroboration from other models, he adds.

Correlations are not causality, of course. Montgomery contends that the
typical explanations for market swings, such as the Lehman collapse or
Russia's debt crisis, are ex post facto. He asserts that certain cycles
tend to recur because of the human nervous system.

"At certain predictable times, subtle neurologic extremes are going to
occur, and these extremes are going to prompt behavior aimed at
ameliorating the attendant perturbation," he writes. Those reactions
supply the fundamental events, such as wars, political upheavals or
devaluations, that become the fundamental events to explain the market
swings, he concludes.

Whether you believe such alternative explanations for market actions is
beside the point. The notion of perfectly rational and efficient markets
has taken a huge, if not fatal, blow by the events of the past two
years. That so many wild things happen on this date is reason enough to
take note.