The solar maximum peaked out mid-2014:
Speculation should peak out with it, and that appears to have been the case with trend changes in stocks, commodities, dollar and treasury bonds:
The speculative target into the solar maximum was primarily equities, as evidenced in allocations, sentiment and (here) valuations:
Stocks are now at risk of a sharp reversal, due to the twin supports for lofty valuations of earnings and (here) economic data having turned negative:
However, analysts are predicting both will improve as 2015 progresses. The first chart shows they have been downgrading Q1 GDP forecasts whilst slightly upgrading the next 3 quarters. The second chart shows they expect a significant recovery in earnings in H2 2015:
Narrow money trends are also predicting an economic recovery by H2 2015, in part due to the benefits of lower commodity prices.
Counter to that, a range of economic data has already dropped into recessionary levels:
The latter two charts play into the global picture, which is one of dwindling world trade:
Financial stress in the US is not yet apparent but has crept up in a way similar to 2011 pre stock market falls:
Supportive to the bull case still are cumulative advance-declines, outperformance of certain cyclical sectors and small caps in 2015, and a current rechallenging of 2014 highs in both leverage measures of margin debt and (here) leveraged loans:
However, most other indicators show continuing degradation and divergence.
So, piecing it together, I believe the key is whether earnings and the economy do recover again or whether we are in the early part of a negative spiral. Solar theory would argue the latter, whilst analyst opinion favours the former. Either the sharp falls in commodity prices are deflationary and recessionary, or they are to become a new form of easing as 2015 progresses, with positive benefits for the economy and most sector earnings.
I suggest it is unlikely stocks will advance whilst the reporting of Q1 earnings and economic data plays out. Rather, at such lofty valuations, we will need to see evidence of the anticipated improvement first. That sets the scene for either a meaningful correction here, or a sideways range trade in the weeks ahead.
My opinion remains the same: we are in the last gasps of a topping process in equities. We see ample evidence in both indicators and economic data of the shift in behaviour post-solar-max. The negative feedback looping is underway but needs a significant drop in equities to complete it. That should now come to pass, post Equinox and post-second-chance (last post). April is clearly a window for a meaningful drop, set against earnings reports beginning on Wed and anticipated further bad economic data.
If somehow stocks can hold up and range trade over the next several weeks whilst early evidence of a pick up in the US does start to trickle through then maybe this mania can continue for even longer. But I still find it extremely difficult to make a case for that.
The SP500 now needs to break down beneath the March lows. The divergences suggest this should occur.
Meanwhile, the commercial positioning on gold suggests a rally, which would fit with a drop in equities: