Solar maxima generate speculation peaks. The latest smoothed solar maximum is likely to have been April 2014. The chief speculation target has been equities, particularly US equities. That mania is demonstrated in valuations, sentiment, allocations, leverage and more. A speculative mania has indeed been delivered at a sunspot maximum again.
The chart looks like this:
If we substitute the Dax for the SP500, the aligned peaking looks clearer:
But where is the subsequent collapse? It really has to occur within the window January to April 2015 to be both within acceptable range and normal seasonality, with the latter guided by the sun’s second tool, geomagnetism:
As things stand, the set-up is as compelling as it could be for this to occur. Global growth proxies, oil and copper, are collapsing. Bond yields are reaching for record lows and yield curves flattening. Volatility is in an uptrend. The US dollar has surged in a deflation wave. Earnings forecasts have been slashed on the moves in oil and the dollar. Plus, the key ingredients for a collapse remain in place, namely excess leverage, very lopsided sentiment and allocations, and a wide range of negative divergences.
Additionally, the real (actual) geomagnetic trend has intensified since August 2014. Here is the commodities index versus trend geomagnetism for the last 6 years. Note the geomagnetism is inverted as higher geomagnetism is negative for sentiment. We see geomagnetism has helped drag down commodities over the last several months.
However, when we look at equities, we see them levitating away from the model in an 18 month mania:
Combining equities with commodities we see the mania from another angle:
The similarities with 2000 are notable. Back in 1998-2000, we saw a similar pulling away from the geomagnetic model. Eventually stocks were dragged back to it, in a post-mania bear:
Note how the geomagnetic trend intensified downwards in the second half of 2000. This would have played a role in popping the uptrend in equities, as it tugged downwards on sentiment, and ought to play the same role now given the steepening over the last several months.
I maintain the parallels with 1937. Ultra low rates and QE, deflationary pressures, excessive valuation into the next solar maximum following the demographic peak. We should be heading for a major low in equities several years from now at the next solar minimum. Top chart from S. Tarassov.