Category: Commodities

Similar Solar Cycles And Market Peaks

Posted on Posted in Commodities, Solar Cycles, Stocks28 Comments

Here is the progress of current solar cycle 24 overlaid on previous solar cycles of similar amplitude (i.e weak sunspot cycles):

15dece1Source: Solen

Solar cycle 24 is going to be flat-topped, making SC16 and SC14 most similar in progression pattern.

Weaker solar cycles such as these generally produce less geomagnetism (geomagnetism being negative for risk markets), whilst flat-topped elongated peaks could produce a sustained period of sunspot-driven speculation (assuming sustained biological impact on humans). On the flip side, we might presume weaker solar cycles produce less human excitement/speculation overall, although markets history does not suggest so (correlating market manias with solar cycle peaks of differing amplitude).

So, a bit of weekend speculation on my part, but here are solar cycles 14&16:

15dece2 15dece3

The source is Solen.info again and I have added the market peaks.

Solar cycle 22, whilst of bigger amplitude, also had a flat top from 1989-1991, and we saw Japanese stocks peak out in 1989 then Japanese real estate in 1991. Solar cycle 20 was also flat-topped from 1967 to 1970 and we saw various markets peak out in turn in this window (as per my recent Solar Parabolics chart). The Dow’s big bull market into 1929 largely ran from the beginning to the end of the flat solar top. Therefore, I am wondering whether there is something in a flat-topped cycle producing a ‘period’ of human excitement and speculation.

Our current solar cycle, 24, is likely going to look flat-topped from 2011 to 2014 in retrospect. Commodities (by CCI index) peaked in 2011? Equities to peak as we turn into 2014? Both with bumper gains from the lows to the peaks.

I previously focused on the correlation between smoothed solar maximum date and market peak dates, and occasionally there was a notable gap, but this is resolved if the ‘range’ of the solar maximum is considered, rather than just the smoothed peak. There’s also logical appeal of sustained human excitement whilst peak sunspots are sustained. Again, just speculation on my part, but we can expect solar cycle 24’s flat top to end by mid-2014, and I therefore suggest we could see one of two possibities playing out. One, equities peak out within the next 6 months, commodities don’t come again, and we thereafter enter the typical post-solar-peak recession (deflationary). Or, two, equities are peaking now and commodities are breaking upwards out of their large consoliation triangles since 2011 to produce a typical late-cyclical final rally and help tip the weak economy into that recession.

15dece4

State Of The Markets

Posted on Posted in Bonds, Commodities, Currencies, Demographics, Geomagnetism, Indicators, Lunar Cycles, Macro, Stocks6 Comments

I think Bitcoin isn’t coming back. Bubble popped as per the bubble anatomy model below, and now at fear-capitulation:

8dece1Source: Bitcoincharts

8dece2Source: PortfolioProbe

Now what about the stock market bubble? No bubble?:

8dece3

8dece4

Source: Dshort
8dece5

Source: John Hussman8dece6 8dece7

The Citigroup Panic/Euphoria model is a composite of NYSE short interest ratio, margin debt, Nasdaq daily volume as % of NYSE volume, a composite average of Investors Intelligence and the American Association of Individual Investors bullishness data, retail money funds, the put/call ratio, CRB futures index, gasoline prices and the ratio of price premiums in puts versus calls.

Add in the declining trading volumes and I believe we have a recipe for a crash ahead – the question is when. An overleveraged, thinning stock market participation, trading at historic overvaluation and euphoria extremes. That said we have to understand the current context: surpressed cash and bond yields makes equities relatively more attractive, so worthy of higher valuations. Here’s a model I’ve used before to assess the environment for equities:

1. Inflation rate – Stocks have historically risen when the official inflation rate is between 2-5%

Inflation is below, so this is a negative.

2. Bond yields versus stock yields – Long term gov bonds yields should not exceed stocks yields by more than 6%

Equities are largely yielding more than 10 year bonds in the major nations, so this is a positive.

3. Interest rates – interest rates should be low.

Ultra low – so again positive.

4. Yield curve – should be normal.

Yield curve is redundant under a balance sheet recession, and I believe that’s the current circumstances. Therefore irrelevant.

5. Stock valuations – Stocks P/Es should be historically reasonable (historic average 17)

Overvalued by CAPE, Q ratio and a number of measures, so negative.

6. Investor sentiment – II, AAII, Market Vane should not be overly bullish

Overly frothy sentiment, e.g. II bull-bear ratio at highest since 1987. Negative.

7. Money supply – should be growing and strong

Collective narrow and broad money measures weakening to flat of late suggesting we may be seeing a top in global industrial production as we turn into 2014. But no clear trend, so I suggest neutral at this point.

8dece8Source: Moneymovesmarkets

Overall it’s a mix of positives and negatives, but notably both at extremes. Stock-bond yield differential at extreme in favour of equities, but equities overvaluations extremes, for example. So which is ‘right’? You know my view: unprecedented collective demographics point to deflation and declining equity and real estate markets that cannot be overcome by government intervention. But this may yet take time to unfold.

Corporate bond yields are also into extreme territory, putting investors into the same kind of risk predicament as in equities.

8dece9Source: SoberLook

As my trading focus is currently short term, I’ll end with my view on that. In line with excessive sentiment readings reached at the start of December, most major stock market indices pulled back last week. A notable exception was the leader, the Nasdaq, which consolidated sideways and then broke out on Friday to end the week at new highs. So more Nasdaq parabolic?

My opinion is the Nasdaq is actually going to reverse this coming week and be the last to join the correction. Volume was notably lower on Friday on that breakout, which is a sign it could be reversed. We are into the lunar negative period and there is a geomagnetic storm in progress this weekend. The Nasdaq shows a breadth divergence for the last 2 months, which again is suggestive of a correction:

8dece10Source: IndexIndicators

When the stock market reached those kind of sentiment levels in the past, normally a correction period of several weeks followed:

8dece11Source: Sentimentrader

Monentum has also waned. So it’ll be an interesting week, and for commodities too. Some signs of life last week which energy breaking out on the growth story, and some volume in the gold and silver buys in their range-bound week, whilst sentiment levels against gold, silver and miners are again at extreme lows. The US dollar is once again looking weak. The commodities indices remain in those large technical triangle noses since 2011, so still watching and waiting.

Disclosure: short stock indices, long commodities.

 

 

 

New secular stocks bull market?

Posted on Posted in Bonds, Commodities, Deflation, Demographics, Indicators, Inflation, Macro, Solar Cycles, Stocks8 Comments

Did a new secular stocks bull market effectively begin in 2009 or 2011, with the recent breakouts above secular bear resistance making for a golden buy opportunity?

26nove16Source: Marketoracle

Or is a secular stocks bear still in progress and we are on the cusp of a major shorting opportunity, together with a GOLD buy opportunity?

26nove17Source: Marketoracle

26nove2Source: Approximity

The case for the stocks secular bull market would be that valuations washed out sufficiently from the peaks in 2000 to the lows in 2009, that central bank stimulus is doing enough to offset collective demographic down forces, and that exponential technological evolution will drive increasing profitability and economic growth from here. Here are a couple of charts I produced last year, pre demographic research, showing the secular bear p/e valuations progress, with the lower chart showing how I expected breakout in 2013 followed by retest of the breakout level in 2014, before secular bull momentum took hold.

26nove9 26nove10

 

That projection was based on historic patterns, and still seems reasonable to me, if this is a new secular stocks bull. 2013 has indeed seen the ‘pentagon’ breakout in the major global stock indices, and a successful retest of the nose of the pentagon in 2014 would reset some of the froth we have built up this year as well as giving technical validation to the new bull.

However, since my demographic research, and broader thoughts progress, I have been more convinced of secular bear continuation, and the megaphone projection above. The case for secular bear continuation includes unprecedented collective demographic downtrends and overvaluation of equities by other measures. Here are Doug Short’s 4 valuation measures all showing historic overvaluation extremes, excepting the 2000 outlier:

26nove18Source: Dshort

There is a case for a breakdown to -50% if historic patterns are to be maintained, before a secular bull could be considered. The doubt is if 2000 was not an outlier but the new norm, namely a racheting up of higher and lower valuations, perhaps as a result of technological evolution also ratcheting up. Alternatively, valuations may change in context – namely that in this current era, ZIRP and QE have killed the attractiveness of cash and bonds, and we are therefore in an era where stocks are relatively more appealing:

26nove1And commodities? Deflationary demographics may have terminated the secular commodities bull before expectations, i.e. without a collective final mania. Or commodities may yet perform as late cyclicals, making a final ascent into 2014 that tips the fragile global economy into recession. The commodities indices are still in large triangles, since 2011, and whilst they remain so, the latter remains possible.

If, however, deflationary demographics are working their way through the commodities complex, then, by my research, there still remains a place for precious metals to shine, as the anti-demographic asset. The third chart down above in this post shows the progress of the dow-gold ratio, and also suggests the two secular possibilities. One, that the rising long term channel shows a repricing in the ratio in favour of equities (due to tech evolution) which means higher bottoms for the ratio and higher tops, i.e. the 2008-2011 lows were sufficient. Or two, that the fiat capital era has produced ever increasing extreme swings, which suggests the ultimate low in the dow-gold ratio is still ahead and will be the lowest yet.

Of course this will all become clear with the fullness of time. If demographics overcome central bank actions and tip the world into deflation, recession or both, then I expect stocks to lose and gold to win. If central bank actions together with tech evolution are overcoming demographics, then we should see a gradual strengthening in economic growth and profitability which should mean stocks (continue to) win and gold loses. Somewhere inbetween would be the scenarios in which rising yields or an inflationary shock (speculative run in commodities) or both tip the world into recession, which could reset stocks to some degree but keep both secular options open.

Back to the near term, we continue to see signs of froth in equities as well as signs of a melt-up in progress. That makes it difficult as it suggests it not prudent to go long here, but the short opportunity that it is setting up could be yet, 5%, 10% higher or even higher. Depends how crazy things might get, and if this the solar maximum then that potential is there.

26nove11 26nove1226nove526nove7

 

 

 

 

 

Stocks, Gold, Money Supply and Debt

Posted on Posted in Bonds, Commodities, Currencies, Deflation, Demographics, Geomagnetism, Indicators, Inflation, Lunar Cycles, Macro, Solar Cycles, Stocks15 Comments

Here is a chart from Gary Tanashian through SlopeOfHope’s charting facility, which could be argued legitimises the current steep ascent in US stocks:

24nove1Parabolic money pump, steeply rising corporate profits, and therefore equities going vertical (on a long term view).

In fact the sharply rising monetary base is directly contributing to those rising corporate profits, as government spending (debt) has been the key driver of corporate profits since 2008:

24nove2Therefore, if the US Fed begins to withdraw stimulus, disappointment in corporate profits is likely, as the chart shows the traditional profits driver of private investment has collapsed and not recovered over the last few years. Once again, this fits with demographics, and we should therefore not expect private investment to ramp up significantly again any time soon. So it’s in the hands of the US government and Fed. Maintain or increase stimulus, corporate profits should keep rising; decrease or end stimulus, corporate profits should retreat.

Turning to the monetary base, equities are not the only correlated class. In fact, gold has had a tighter correlation, until 2013. Here 2000-2012:

24nove3Source: Fool.com

Gold displayed a similar correlation with government debt, also until 2013.

24nove4

Source: RockSituationReport24nove5

Source: SlopeCharts

The first shows the debt limit, which will be back on the agenda soon, and surely must keep rising, whilst they retain the need to stimulate, which they will due to demographics. The second shows debt as a percentage of GDP, which actually fell back a little in H1 2013 (my extension on the chart). The reason for that was better than expected economic growth and a trimming in certain areas of government spending. Total debt continues to rise at a historically rapid rate.

So are these correlations with gold broken, or is gold set to come back? One more chart shows that the US dollar and treasury yields have been largely inversely correlated with gold and the pair strengthening for much of 2013 has been a key factor in gold’s decline:

24nove6Source: SlopeCharts

In my opinion, gold’s relations with money supply and debt levels are logically sound, and both money supply and debt should continue to rise into the future under the demographic trends. I therefore I expect gold can restore its bull market if the US dollar and treasury yields tip again into sideways or declining trends. If the US economy strengthens and a little inflation is restored, then this is unlikely to happen and gold will remain in the doldrums. However, demographics and debt suggest the Fed will have to keep fighting to maintain growth and keep deflation at bay (taper disappointment, yields suppression, new measures to attempt to inflate), which could bring about such a reversal in fortunes.

I still expect equities can go a little more parabolic first, under a typical solar maximum speculation push. However the warning flags already in place of dumb/smart money, trading volumes, margin debt and trading credit balances, and overvaluations (e.g. Q ratio) suggest it is most likely limited in duration and size. I would go with something like this from trader Moe:

24nove7Source: Trader Moe

A further 10% gain in a rapid time, with a catalyst being collective major breakouts in the major global indices, to get to some crazy extreme indicator readings, and a subsequent termination. My first checkpoint is the start of December, because the 3rd is the new moon and as of the 4th geomagnetism is forecast to ramp up again. If equities can rally hard and fast into that point, with a spread of indicators flashing, then I would suggest that could be the earliest point for declines to set in (barring any external shocks). If, however, equities can rally through the seasonally strong Xmas period, and solar intensity stays high into the beginning of 2014, then the next checkpoint would be early January.

 

Divergences, Ratios and Surprises

Posted on Posted in Commodities, Deflation, Demographics, Geomagnetism, Indicators, Macro, Solar Cycles, Stocks47 Comments

Here are the latest economic surprises indices for the major nations:

19sept5 19sept4 19sept3 19sept2Source: Citibank

Japan aside, economic surprises for most of the majors topped out as we turned into September. Historically there has been a fairly good correlation between economic surprises and stock market returns, but the correlation has deteriorated throughout 2013 and turned negative:

19sept7

Source: JP Morgan

Is there anything about that period from early 2009 to mid 2010 where correlations also were anomalously negative? My take is that by March 2009 most of the major stock indices were at p/e 10 or below, and thereafter we saw a period of post-panic bargain hunting at historic cheapness, despite and regardless of continued disappointing economic data. That doesn’t apply at today’s valuations.

Here’s another look:

19sep1I’ve charted the peaks in US economic surprises versus the SP500. It can be seen that from 2006 to 2012, trend reversals in economic surprises reliably brought about corrections in the SP500, but sometimes with the stock market eeking out a marginal new high and then rolling over. But since the end of 2012 the two economic surprises peaks have been largely ignored by the market.

There have been other notable divergences since the turn of the year.

Equities have diverged from geomagnetism:

19sept12

Junk bonds, which have historically correlated with equities fairly well under ‘risk-on/off’ sentiment, have parted ways with stocks and are actually down for the year. Commodities likewise:

19sept11Source: Yardeni

I have extended this commodities:stocks ratio chart from early 2012 to the current level in November 2013, showing the degree to which stocks are now valued versus commodities:

19sept13Source: Stockcharts

Down to 0.15, very close to the level reached at the 2000 equities peak.

Versus bonds, equities have also made a sharp run up in relative valuation this year:

19sept14Source: ispyetf

If this is the solar maximum at the end of 2013, then it would be normal, by history, for the secular asset class of the time to be bid up in a speculative finale, diverging from normal correlations and leaving models behind, in a final overthrow. If this is occurring with equities (perhaps disinflation has killed off commodities), then the above charts would be evidence for that, and we are left trying to look for clues as to how much further, both in time and price, the speculative finale has to run. If it isn’t equities, but rather commodities that are bound for a speculative finale (as they would rather befit the ‘secular’ asset class leading into this solar peak), then the above charts are warnings that the rug could be pulled from under equities at any time.

Right now, the balance of evidence suggests that it is stocks being bid up to a speculative finale, if my solar thesis is correct. Even without solar, we see various evidence for that, in my last post and this. See how margin debt has accelerated over the last 12 months, as it did prior to the last 2 major stocks peaks:

19sept10

Source: Dshort

And now look at the decline in trading volumes:

19sept15Source: Marketwatch

There are fewer and fewer participants in the market chasing it higher, and the margin debt and credit account levels (last post) suggest increasing leverage to do so. Unless more people and institutions come to the market, then that is a recipe for a steep decline or crash ahead. By demographics, those additional participants are unlikely to materialise. Recall that demographic trends in the US were up into around 2000 and have since been downward, continuing this decade. I suggest that is what we are seeing in the trading volumes ‘mountain’ above.

In summary, I believe the equities bull is on borrowed time and that risk-reward is stacking up on the short side. But it comes down to how much further in price and time stocks can extend first. If solar-inspired speculation is at work then parabolic becomes more possible. If on the other hand equities are to make a topping ‘process’ rather than a parabolic, then by normal measures this has not started in a meaningful way so should at least extend for several months and postpone a major decline until 2014. If commodities are to become the speculative target then they should take off as late cyclicals whilst stocks make a topping process. This remains theory only, and deflationary demographics are a headwind to this occurring, so I have my doubts.

On that note, if we look at when gold really took off in the past, it was under conditions of negative real treasury yields. Rises in yields over the last 12 months, together with shrinking inflation, have taken real yields positive and are a problem for gold. Deflationary winds, due to demographics, threaten to take inflation yet lower, whilst treasury yields by late 2012 had reached historic extreme lows, suggesting renewed downside may be limited. So, if I could speculate how fortunes could be reversed in gold, it would be either the world tips into deflation and gold performs more ‘uniquely’ (gold’s performance under deflation is limited in history, but I suggest it ought to perform as the default go-to asset under such conditions when all others are unattractive) – or – central banks take renewed action against the disinflation in progress by increasing rather than decreasing stimulus, e.g. the ECB launches QE and the Fed maintains QE rather than tapers.

19sept9Source: Dshort

State Of The Markets

Posted on Posted in Bonds, Commodities, Currencies, Deflation, Demographics, Indicators, Inflation, Lunar Cycles, Macro, Solar Cycles, Stocks7 Comments

Starting with the equally-weighted commodities index versus the world equities index:

17nov11Source: Bloomberg

Commodities remain depressed but still within a large triangle. Last chance though here as the triangle compresses and they test horizontal support again. Their underperformance, based on supply and demand, is consistent with the demographic trends now in place in most of the major nations.

World equities broke out of their mid-year range, rendering the potential topping process redundant. That means equities need either to start over a multi-month topping process at some point ahead, or make a parabolic top instead. The increasing rate of gains, shown by the trend, suggests the latter could potentially occur (or be occurring), and this is supported by increasing evidence of a solar maximum taking place now:

17nov13Historic solar maximums have been correlated with speculative manias, such as Nasdaq 2000, Nikkei 1989, gold 1980 (last 3 solar maximums). I anticipated that commodities would be the speculative target for this solar max but there is reasonable evidence that such speculation froth is taking place in equities, as the next 5 charts show.

Firstly, Hussman’s long standing bearish call on the markets has to be taken with a pinch of salt, but the ‘bubble’ technical overlay shows what could be occurring:

17nov6Source: Hussman

Secondly, the steep wedging of both the SP500 and volatility indices is also indicative, and suggests both could be heading for a pop:

17nov5Source: Chris Kimble

Third, the situation for free cash in margin accounts together with margin debt levels reveals a dangerous extension, which is also suggestive of excessive speculation:

17nov3Source: Dshort

And fourth, a lack of hedging to go with that:

17nov2Source: Sentimentrader

Finally, fifth, the rally is now much more weighted into the hands of traditionally ‘dumb’ money rather than ‘smart’ money participants:

17nov1Source: Sentimentrader

On the flip side, we do not see significant deterioration in breadth nor rotation into defensives that would ordinarily warn of a top in the markets. The next 2 weeks are the positive lunar fornight so there is a reasonable chance that equities continue to rally through that period, and indeed could feasibly carry that through the traditionally strong Xmas period into the beginning of 2014. I believe the technical breakouts and steepening trends in stock indices together with the solar-inspired excitement could potentially make for a parabolic finale here. It’s a tough one to call because of the extremes already reached in some of the indicators above. Complacency is high and it has been a long time since a 10% correction. Stocks are also overvalued, historically, as the Q-ratio and CAPE reveal:

17nov7

17nov8The 2000 outlier shows how much further overvalued stocks could feasibly yet become, but that anomaly aside we can see that by both measures warning signs are flashing. What could tip the market over? Rising rates (bond yields are back on the rise), an inflationary shock, or a deflationary shock. Normally, stocks would tip into a cyclical bear under excessive inflation. Right now we see the opposite. Take a look at the rate if disinflation in Europe:

17nov9Source: Yardeni

Add to this a crisis emerging again in emerging Europe, and I can see a case for the ECB taking to QE. If that were to occur, then maybe commodities can catch a bid again and make their speculative rally, under a brief but significant inflationary shock. Chris Carolan’s solunar model for crude oil paints the possibility that oil could come back here:

17nov12

Source: Spiralcalendar

If the whole class cannot rise again, then precious metals alone could, under a deflationary shock, i.e. the world tips into a deflationary recession. This could occur with further commodity falls dragging global inflation rates yet lower. Emerging markets such as India and Brazil are in trouble again with low growth and high inflation, sinking currencies and debt problems. And leading indicators suggest global growth could be tipping over as of year end in the developed nations:

17nov10Source: Moneymovesmarkets

Under deflation, equities would normally fall hard and fast, to the lower ranges for CAPE and Q ratio above. That would likely mean sub 2009 lows in nominal terms. But under inflation, equities normally more slowly wind down to those valuation levels, and in nominal terms the damage is less severe. Under deflation the US dollar should rally, whereas under inflation the US dollar should break down. The US dollar was on the cusp of a major breakdown several weeks ago but has since rallied away from oversold and overbearish conditions, leaving both possibilities on the table, and its performance from here should be a key signal.

Right now, the deflationary outcome looks the most likely, which would make a short on the stock indices a very tasty trade. However, before that there is the potential for stocks to climb further, and possibly at an increasing trajectory. That makes for difficult timing. With the positive lunar fortnight right ahead, and momentum still with equities, I am expecting stocks can rally further in that period, barring any external shocks. But with various high danger levels already reached for this stocks bull, I am looking to build short here, not chase long. Regarding commodities, I continue to watch and wait, still long the complex, but not adding. I believe precious metals will come again, due to the unprecedented demographic downtrends, but am less sure about the broader complex due to the demographic impacts on demand. But let’s see – the moment of truth draws nearer – see below – and I don’t want to try to front-run or second-guess it. A speculative and final rally in commodities remains a possibility whilst the complex continues to consolidate up high. Yet if they cannot rally, and break down below the major support, I believe the global tipping into deflation will accelerate and kill equities in due course.

17nov14Source: Martin Pring

Latest

Posted on Posted in Commodities, Geomagnetism, Indicators, Macro, Solar Cycles, Stocks17 Comments

I’m on holidays, so just some updated data below.

Sunspots still high, adding weight to possibility of solar max still ahead – modelled versus SP500 here:

29oct20131

Geomagnetism forecast extended for next 3 weeks, overall still flat – modelled versus commodities index here:

29oct20132

FOMC output tomorrow, new moon on Friday, lunar negative period begins the start of next week.

Economic surprises falling in US and Europe, improving but negative in Japan, and positive in China:

29oct2013329oct20134

29oct20135 29oct20136Leading indicators for the US falling:

29oct20137 29oct20138

Update

Posted on Posted in Bonds, Commodities, Currencies, Geomagnetism, Indicators, Lunar Cycles, Solar Cycles, Stocks17 Comments

Stock indices rose into the full moon, making for a third consecutive lunar inversion. Here is the updated lunar-geomagnetic model versus the SP500:

21oct20131Forecast geomagnetism is fairly benign and we are now into lunar positive fortnight, however the three back-to-back inversions leave me less confident as to the direction of the stock market. Normal service may resume here (i.e. a two week uptrend) but the triple inversion maybe has some significance.

Breadth broke out, as in Advance-Declines:

21oct20132Source: Stockcharts

This development casts doubt on a stock market topping process. However, other developments have added weight to my criteria list for a top (last post), namely treasury yields fell again, commodities indices edged up again, ECRI leading indicator growth fell further, narrow money leading indicators for the G7 have worsened, Citigroup economic surprises for the major nations have all turned into downtrends, bar China which has turned flat. Here are the CCI and CRY commodity indices:

21oct20133

 

Source: Bloomberg

Still tentative uptrends short of momentum, still too early to say if they are going to take off. Crude oil has flattened out but is still in a downtrend for now, whilst gold broke up beyond downsloping resistance on Thursday and held the break on Friday:

21oct20134

Follow through is still required though, so also tentative but more promising.

The result is I am watching the markets at the start of this week: can stocks rally and the SP500 break upwards out of its wedge on good breadth, or is another pullback going to come to pass (earnings revenues disappointing so far but the season only still getting under way); can commodities (particularly gold) rally and gain momentum; can the US dollar break beneath another support level at 79 (expectation has switched again to no QE taper in the near term)?

For a more definitive judgement on whether equities are topping cyclically we need more time, and more developments. On balance I believe we are in the early part of a topping process, pending further evidence. Next we would require a deeper correction ahead to produce a lower low, followed by a rally back to the highs whilst leading indicators fall. Rising commodities would normally play a role too, and if they are in a new uptrend, they need more time to rally some way higher. But all this could take weeks or months to fully develop.

I am also watching the sunspot count as the sun has woken up again. If the solar max is still ahead then we ought to see a sustained period of higher solar activity.

21oct20135