Global Investing

Solar activities and market cycles

November 29, 2010

Can nature’s cycles enrich our finance and market theories?

Market predictions based on the alignment of the sun, moon and the earth and other cycles could help investors stay disciplined and profit in economic storms, says Daniel Shaffer, CEO of Shaffer Asset Management.

SPACE/SUN

Shaffer writes that sunspot activities show that the sun has an approximate 11-year cycle and as of March 31, 2009, sunspot activity has reached a 100-year low (this, interestingly, coincides with a cycle low in equity markets, reached sometime mid-March in 2009).

But a low in solar activity seems to be followed by a high. Scientists are predicting a solar maximum of activity in sunspots in 2012 that could e the strongest in modern times, according to Shaffer.

“The concern is that something weird is going on and that the current extreme low in the sunspot cycle, similar to the stock market, can be followed by an unusually high sunspot cycle leading to a solar maximum, or in other words, a peak in sunspot activity,” he writes in his latest book.

“Our analysis is currently indicating a stock market low in the United States in approximately year 2012, which coincides with either a sunspot low or high depending on the cycle. ”

Shaffer says nature creates cycles or recyles, as do stocks, bonds and currencies and it is up to investors to determine which to profit from.

“There is a force, stronger than us, that may control cycles in the markets… I believe living in tune with the cycles, which can be upset very easily, is a major way to participate in the markets, but one must always remember that trees don’t grow to the sky and how long can a stock go? Zero,” he says.

David Skarika, an author of  “The Great Super Cycle”, believes market cycles occur every about 15 years. Since 1990, there have been four specific bear market cycles, lasting approximately 15-20 years in length. There have been three bull markets, lasting between 8-18 years.

“We are too early in the cycle. Most cycles last 15-20 years, amd at this time we are only about 10 years into this secular bear market cycle… We should be approaching the second half of the secular bear market cycle, which should produce a flat stock market with high inflation,” he says.

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