Friday, July 11, 2008

Sunspots and the Stock Market

As a corollary to the previous post, I looked up the chart of the Dow Jones Industrial Average to compare it to the solar activity cycle.

Curiously enough, the Dow doesn't follow the eleven-year sunspot cycle, but it does relate to a smoothed-out version of the cycle, on a decade-to-decade level.

The solar maximum in the late 1920s was weaker than the maximum in the late 1910s, which then correlates to the drop in the stock market leading to the Great Depression (and some rather nasty weather in the early 1930s).

The solar maximums of the late 1930s, the late 1940s, and the late 1950s are each progressively stronger, with the period of solar maximum in the 1950s being almost three times as strong as that of the 1920s. During this time, from the bottom in 1932 until 1965, the Dow Jones Industrial Average steadily climbed (discounting hiccups every few years).

What happened in the late 1960s to kill the Dow's climb?

The sun got weak.

The solar maximum in the late 1960s/early 1970s was weaker than even the maximum in the late 1930s.

The Dow didn't recover until 1982 or so, which corresponds to a stronger solar maximum.

The next climb lasts from 1982 till 1999, which just so happens to be the start of a slightly weaker solar maximum (but, contrarily, one with even hotter temperatures).

The sun is now dead calm. Solar scientists had predicted a strong cycle peaking in 2011, but have recently revised their predictions to perhaps a very weak cycle peaking in 2013. In other words, don't expect great things from the stock market until 2020 at the earliest.

Sorry to be the bearer of bad news. I must be getting pessimistic due to the lack of energy from the sun.

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