U.S. Stocks: Eternal Question of the Spotless Sun

By Nico Isaac
Tue, 05 May 2009 17:15:00 ET

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.
("Quiet" Sun Sends Explosive Message: The May 2009 Elliott Wave Financial
Forecast makes a compelling case as to why the current solar flameout is a
dark sign for stocks. Get the full story today)

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.