The Dow Jones World stock index shows a strength divergence on a higher high followed by a breakdown, equivalent to the 2000 and 2007 major peaks.
The MS World stock index, which excludes the US, shows a mid-year 2014 peak, which was the solar maximum. The same occurred at the last solar maximum of March 2000. US stocks:bonds and stocks:dollar ratios, as well as crude oil also broke down at the solar max mid-2014 as shown.
Skew (tail-risk or protection against a large move in price) as a ratio to price (SP500) has taken off similar to the bear market initiations in 2000 and 2007.
The SP500 has formed a rounded or arch top whilst risk (stocks:bonds ratio), volatility (inverted) and breadth (stocks over 200 moving average) all diverged. These negative divergences are the hallmark of a topping process, as they were in 2007.
The mid-year 2014 solar maximum also coincided with peaks in other risk assets, namely junk bonds and leverage loans.
The NYSE index effectively peaked out at that mid-2014 point, measured in price, breadth and stocks:bonds.
The German DAX, Hong Kong HSI and US Russell 2000 all show a topping process similar to previous major historic peaks.
These analogues of major historic mania peaks are particularly relevant when we compare 2014/15 valuations, leverage, allocations and sentiment, and, 1987 aside, the solar maximum is pertinent too.
The FTSE shows a similar topping process and with negative strength divergence like in 2000 and 2007.
The inflation adjusted, real SP500 casts doubt on the ‘new secular bull’ that nominal price may have suggested post-2013 (for evidence we remain in a long secular bear market since 2000 see ‘Targets’, ’10 Demographic Charts’ and ’10 Solar Charts’). The CPI inflation data is only updated infrequently so is lags development in price, but nonetheless should now have rolled over along with the risk measures. The destination should be single digit p/e valuation, which cross references with demographic forecasts.
A united picture of solar influence reveals a speculative markets mania into the mid-2014 solar sunspot max followed by a reversal under the intensification of geomagnetism. This fits with behaviour at previous solar maxima.
The mania within the mania, or poster boy, has been Biotech, whereby a parabolic price ascent to valuation that even exceeds the 2000 Nasdaq, has now popped and by history ought to now fully retrace as shown.
Chart Sources: Stockcharts, Financial-Spread-Betting
Photo Source: National Geographic