Red Flags Update And More Solar Research

First, the flags:

1. China repo rate has escalated sharply today suggesting another cash crunch may be at hand:

20ja1Source: Chinamoney

2. Insider selling in the US is now historically high, a further sell signal for equities:

20ja2Source: Barrons

3. Comex gold stocks that are eligible for delivery versus open interest has risen to a historic extreme of 112:1. This means that the gold owners will demand higher prices to put their gold up for delivery and is bullish for gold prices.

20ja3Source: Jesse / goldchartsrus

Now to the solar findings.

Below is a chart showing the last 4 solar cycles. In the last 4 decades there have been 3 major real estate peaks in the US and UK: 1979, 1989 and 2006/7. There has been one in Japan: 1991. In the last 4 decades there have been 2 secular peaks in the CCI commodities index: 1980 and 2011 (which exceeded the 2008 high). In the same period we saw one major secular equities peak in Japan in 1989 and two major global equities peaks in 2000 and 2007. All are annotated below.

SCsThe theme of major market peaks falling at solar maxima is again revealed, but two recent anomalies stand out: the equities and real estate peak of 2007 falling at a solar minimum, rather than a solar maximum; and the commodities speculative peak of 2011 falling on the rise towards SC24 maximum.

Tackling the first, that 2007 peak gave way to the 2008 financial crisis, in which we saw crashes in real estate, equities and crude oil prices. This is in keeping with other crashes and crises that have historically occurred around solar minima. 1987’s historic crash in equities took place near a solar minimum. 1994 delivered a treasury bond market crash. 1997 saw the Asian financial crisis and a crash in equities. 2008 the aforementioned multi-asset crashes and financial crisis, and 2010 the flash crash in global stocks. All saw significant price rises into the crashes/crises. Central bank policies of this last decade were particularly friendly to asset bubbles, hence a suitably large boom and bust.

Turning to the second anomaly, one possibility is that commodities have not yet peaked and go on to make a higher high than 2011 in a late and swift cyclical charge as equities top out.

20ja4Source: MCRI

If they have already made their highs, then one explanation for their early peak on the SC24 maximum could be that China’s demographics topped out around 2010, and as the main driver of commodities demand the speculative finale had an earlier bias. China’s demographic trending to peak is perhaps better reflected in the bull market in commodities from 2000 than in their brief stock market mania around 2007.

But there is something else. Solar cycles average 11 years 1 month, but there have been outliers as short as 9 years and as long as almost 14 years. Here are the smoothed solar maxima of the last 100 years:

Aug 1917 (+11y6m after the previous solar maximum)

Apr 1928 (+10y8m)

Apr 1937 (+11y)

May 1947 (+10y1m)

Mar 1958 (+10y8m)

Nov 1968 (+10y8m)

Dec 1979 (+11y1m)

Jul 1989 (+9y7m)

Mar 2000 (+10y9m)

Dec 2013 ? (+13y9m)

Most aren’t far from average cycle lengths, but May 1947 was a year shorter, July 1989 shorter still, and if this smoothed solar maximum turns out to be around December 2013, that will be a much longer one than any of the others. Even if the smoothed maximum turns out to be Feb 2012 (the smoothed max to date) it will still be an outlier on the long side.

If lunar phasing still works despite artificial lighting and is to some degree ‘hard coded’ in human evolution, could sunspot cycles be too? Do we see evidence of human excitement through speculative peaks occurring around 11 years 1 month after the last solar maximum on those occasions where solar maxima occur significantly earlier or later?

The last smoothed solar maximum was March 2000. Add 11 years 1 month and we get April 2011, which is where we saw speculative peaks in silver, cotton, coffee, rare earths and others. However, we also see evidence of a speculative peak occurring now, at the likely smoothed solar maximum, as evidenced in many indicators and measures of equities.

July 1989 was an early outlier. 11 years 1 month from the previous peak would have been January 1991. Close to that, Japanese real estate peaked June 1991 and crude oil peaked in October 1990 in a war-associated major spike. However, we also saw US and UK real estate and Japanese equities peaking close to the actual solar maximum of July 1989.

May 1947 was an early outlier. Had it been a more regular May 1948, then we saw wholesale prices and crude oil peaking out around 1948. Yet commodities such as wheat, corn and oats peaked close to the 1947 actual smoothed maximum.

That may suggest there is some degree of hard coding of rhythm in human excitement, as well as some degree of variance in speculative peaks according to when actual solar maxima fall. However, when we look at the solar cycle progression charts,  we find that the tops of the solar maxima stretched across 1989-1991 and 1947-1948, which suggests there was no anomaly: speculative peaks were in line with actual solar maxima. But this is not really the case for the 2011 speculative peaks which fell on the rise into SC24 maximum. Therefore, we need to wait to see if commodities do make a late charge to a high exceeding 2011, wait to see if the solar maximum is falling and completing now, and also to wait to see if equities top out here and deliver a peak aligned with that potential solar maximum, before we can judge this further.

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18 thoughts on “Red Flags Update And More Solar Research

  1. An addition – historically solar maxima have correlated with war, protest and revolution, and we see evidence of that at recent peaks:

    1968 solar max – peak of US in Vietnam war
    1979 solar max – central america civil wars, Sep 1980 iran Iraq war begins
    1989 solar max – communist Europe revolutions and 1990-1991 gulf war
    2000 solar max – Great war of Africa 1998-2003; 9/11 2001 – ‘war on terror’

    2011 Arab revolutions
    Current time: protests Thailand/Ukraine – but no major conflict.
    So again, I’d be speculating: either we may be due for a more significant conflict erupting right ahead (which could also potentially trigger a commodities rally, depending on what/where), or it was hard-coded in human excitement into what would have been a normal target time zone for a solar peak: spring 2011.

  2. John think you may be onto something here but needs more scientific research. I would organize the dates of the significant events you have by the earth’s position around the sun as that would have an impact on the inter-planetary magnetic fields disruption by planetary alignment with the amplitude of the solar wind and directional CMEs. Further this to position of where stronger economic nations are located at different times of the year based on Earth’s axis tilt and may some interesting data. I think it will only give more credit to angular momentum theory and the UV and other electromagnetic effects on earth’s weather / geomagnetism.

    1. wxguru:

      Would the ‘simpleton’ way of trying to decipher angular momentum be by looking at an ephemeris? I have tried that approach and cannot see any patterns; perhaps not because they do not exist but rather because I am not looking at the correct data. Also, is there a way to reduce the time windows (using the data you suggest)
      to within, say one week? Finally, how would you suggest one go about researching such an ambitious project?

      1. I’m still learning this stuff myself. Before coming to John’s site and then doing further research I didn’t even know what the word ephemeris meant. That said, there are research papers which give a mathematical formula or two for the sun’s angular momentum or wobble about it’s axis as it is tugged by the planets. The Bradley uses an ephemeris, but I haven’t written any software code to load in ephemeris/time tables from NASA JPL’s server. Those will get you down to the week and more accurate. What you really need is a table of facts about the characteristics of the planetary and solar bodies and then some math.
        http://www.zipcon.net/~swhite/docs/astronomy/Angular_Momentum.html

        The above link should help with info like:

        “So the rotational angular momentum of the Sun, which is 1.1e42, is less than 4% that of the total orbital angular momentum of the planets, which is 3.1e43.

        Based on this calculation Jupiter’s orbital angular momentum alone accounts for over 60% of the total angular momentum of the Solar system!

        The orbital angular momentum of the Moon 2.9e34 is about four times that of the rotational angular momentum of the Earth, which is 7.1e33. ”

        Where this comes into play though is how this interaction between body x and body y impact magnetic fields of charged particles. The relationship gets in photons and energy and mass interactions. There is a very complex way of explaining them beyond topic of this site, but will post a pointer:
        http://ncatlab.org/nlab/show/Kaluza-Klein+mechanism
        http://en.wikipedia.org/wiki/Fundamental_interaction

  3. at this morning’s high the computers hit the same sell algo they have hit since the start of year… at the lows the computers covered as an alternatve bullish pattern completed….. time for one side to be wrong….

    1. the tools i use give me minimum targets and an idea of how strong a move may be…the move off the lows this morning could make new highs before the first retrace.

    2. i do not think it was by chance that the recent replacement stocks in the INDU
      are high priced… given that it is a dollar weighted index, it now is very easy for the computers to move the dia etf to the required pivots by moving one higher priced stock…. such a tactic has been used 3 times in the last few trading days… IF the INDU is acting weaker or stronger than the other indexes…. that is what has been happening.

    3. please do not take anything i post as a criticism of John’s work… i fully expect him to be correct very soon. I am simply contributing what i know and make my living on.. the tendencies of the computers…hoping that traders will get comfortable with the way my work is described so that when my work is in agreement with John’s my saying so will be from someone who in the past has been willing to say what he thinks as price moves…..to kill the short term bullish geometry in place today’s low would have to be taken out… and not until new highs kick in will i be comfortable with longs taken at today’s low

  4. Slater9, speaking for myself I value your posts and would like to learn more about the methodologies you use (assuming they’re not proprietary). John is the ultimate arbiter, of course, but I do think there’s value in seeing if/when different approaches synch in calling a major change in market direction, emphasis on major.

    1. Slater has kindly shared his approach with me by email, and it is interesting stuff. Pitchforks and geometry, the predictive power for which he suggests is based on copying computer algos.

  5. wxguru:

    Thank you! for the favor of your detailed reply. This information should keep me busy for awhile to see how it might help improve the timing of my methodology.
    My best to you!

  6. Once again, fantastic work. The new macroeconomics. Definitely a piece of my macroeconomic picture. From what I can see only cattle are making new highs. Crude oil and heating oil are poised to move higher. Whether they will break their 2008 all time highs I don’t know. Soybeans, wheat, corn, cotton, sugar, coffee would have to make some historic runs to break their highs.
    Thanks again for the great work.

  7. John, revisiting. Reviewing the moves of the market as correlated with the SCs 23 & 24… a dramatic drop is not imminent, well a drop perhaps but not a total collapse. I notice that the declining solar activity between ’02 and ’05 in some ways may have fueled the real estate bubbly which came to a head in ’07 near the minimum. Assuming similar action can hold and we’re now back on track for an 11 year cycle, let’s assume ’09 plus 11 years gets us to 2020. That suggests 2012 and 2014 as likely years for the solar max (per your illustration above), 3 and 5 years beyond the minimum of ’09. Likewise, after a minor market pull back or series of pull backs we could see prices rise despite declining solar activity into say 2018, 2 years shy of the next minimum in a mirror action of SC23… Just something I was ruminating on and that was niggling at my brain… Great work… will continue monitor… Best… HVA

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