It's common knowledge that if you look directly at the sun, you go blind; or at the very least, become visually impaired. In matters of finance, however, "looking" directly at the solar surface actually heightens one's predictive vision.
In over 100 years of data, the most "illuminating" indicators of major stock market turns include more than the usual contenders: Cycles, sentiment, and wave structure. They're also Sun "Burps."
Our personal records of this phenomenon go back to a 1956 study by Wave Principle pioneer Charles Collins. Then, in the September 2000 Elliott Wave Theorist, Bob Prechter updated the original thesis in his own piece titled "Sunspots and the Wave Principle." Here's the main premise:
An increase in the frequency and intensity of solar flares coincide with a rising stock market, into an overlapping peak in both sunspot activity and soaring averages. As sun flares fall off, so do stock prices, ending in a synchronized period of solar and economic cooling.
At the time of the September 2000 Theorist, our analysts applied the loss of upside momentum in sunspot production to their overall bearish call for stocks and wrote: "On the basis of a pending peak in the sunspot cycle... investors could avoid the most serious stock market declines" to come.
The deepest bear market since the Great Depression followed, before rebounding in 2002.
Flash ahead to today: From their respective 2000 highs, the Dow Jones Industrial Average remains 40% down and the NASDAQ, 70% in the red. AND -- as 2008 saw equities endure their worst annual close since the Depression, the year also saw sunspot activity sink into its own dark state. To wit: 2008 was the quietest year for solar activity since 1913 to postpone a long-anticipated uptick even further.
"'Quiet' Sun Baffling Astronomers," reads a recent BBC News. "Sunspots, Where Have They Gone?" asks another popular news site. (Examiner.com)
Well, while the lull in solar flares has "worried" heliologists glued to their telescopes -- our analysts see the solar flameout as fitting perfectly with the previous dimming of stocks. On this, the May 2009 Elliott Wave Financial Forecast presents a powerful close-up of sunspot activity and the stock market since 1900.
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