Ap Index of Geomagnetic Activity and S&P 500 Returns | Lifang Peng et al.

Existing research provides strong evidence that geomagnetic activity impacts stock investment decisions by influencing human health, mood, and behavior. Using monthly geomagnetic indices and US stock market indices from the past 20 years, we found compelling evidence supporting a causal relationship between geomagnetic activity and stock market returns.

 

High AP Index, low stock market performance—really?

Sunspot Number and Ap Index 2018 into 2032 (NASA, updated December 5, 2024).

 

The results were robust, indicating that higher geomagnetic activity, which often corresponds with intense solar activity, is inversely related to stock market performance. In other words, when geomagnetic activity was higher, the stock market tended to perform worse.

Reference:
Lifang Peng, Ning Li, Jingwen Pan (2019) - Effect of Ap Index of Geomagnetic Activity on S&P 500 Stock Market Return.

 

S&P 500 (daily candles) vs Ap Index. 

 The semiannual variation of geomagnetic activity is linked to the interaction between the solar wind and Earth's tilted magnetic field, which typically causes increased geomagnetic disturbances around the equinoxes and lower activity around the solstices.

 

See also:
Vladimir Belkin (2024) - Strong Inverse Correlation between Ap Index and Gold Price. 

Vladimir Belkin (2024) - 2025-2027 Oil Price Decline Linked to Solar Cycle Activity. 

Bojan S. Dimitrijević et al. (2016) - Sunspots and Stock Markets: Evidence of their Interdependence in Transition Countries.

Mikhail Gorbanev (2012) - Sunspots, Unemployment, and Recessions: Can the Solar Activity Cycle shape the Business Cycle?

Robert R. Prechter and Peter Kendall (2011) - The Sunspot Cycle and Stocks.

Anna Krivelyova and Cesare Robotti (2003) - Playing the Field: Geomagnetic Storms and the Stock Market.

Energy Flow Theory & Financial Markets | Al Larson

As planets orbit the sun, they exert tidal forces upon the gases of the sun. These tidal forces cause swirling motions on the sun, creating sun spots, solar flares, coronal holes, and other energy events. All these effects combine to vary the amount of radiation that leaves the sun. That solar radiation is our sole source of energy. We are subject to every fluctuation in it. Solar radiation travels to the earth in two ways: as direct radiation, such as sunshine and radio waves, and as charged particles carried by the solar wind. This flow of charged particles forms a torrent of energy that blasts earth creating a bow wave and a wake, just as a boat going upstream would do. This bow shockwave forms a magnetopause between the earth and the sun. It interacts with the earth’s electromagnetic field, shaping and adding energy to it. At the poles, charged particles follow the magnetic lines of force into our atmosphere. This creates a charged layer called the ionosphere.

As this solar wind passes earth, it shapes our magnetosphere into a teardrop shaped envelope of trapped charged particles. As solar radiation varies so does the earth’s magnetic field, atmospheric ionization, and temperature. Scientists have tracked down a host of relationships between these events and a variety of earthly phenomena such as weather, climate, crime rates, plant growth rates, frequency of thunder storms, blood Ph levels, psychiatric emergencies, and many others.

As part of this activity the solar wind charges our ionosphere to a voltage of approximately +300,000 volts. This charged layer above the earth represents the positive end of a battery. When you stand on the ground you are standing on the negative end of this battery. This is the earth’s electric field that we all live in. When you stand erect, it places a voltage on the top of your head of about 240 volts. That is the same voltage as used by your oven element. Fortunately for us, this is not a high current power source. Otherwise, we would fry.

 

 

 

We are affected by this field. This voltage causes currents to flow through us as we live on earth. These currents are approximately 2000 times as strong as the biological currents that run our brain, our nervous system, our muscles, and our organs. All of our body’s electro-chemical systems are subject to the fluctuations in these currents. The ionosphere and the charges on it form a very dynamic system. Events such as solar flares can cause rapid and large changes in this voltage. Our biological circuits feel these changes. These changes can affect all our biological processes including our emotional moods. Scientific studies have shown that changes in ionization cause people to feel giddy to gloomy. These moods show up in the markets. It is well accepted that markets move in response to fundamental forces and investor psychology. A major finding of my work is that investor psychology is driven by the physical energy system. Those emotional rallies and declines are controlled by the currents that run through us. We call those currents emotions.

[...] I have related the timing and price level of market turns to these currents. I have exhaustively verified every link in this chain of cause and effect. I have developed a solid mathematical knowledge of how this energy flow controls pattern, price, and time in markets. While it is not possible in a chaotic system to make perfect predictions, I have been able to formulate a computer program called XGO which predicts markets with between 60% and 90% accuracy […] This S&P forecast has been running about 80% accurate over the past two months. It was computed over one year ago, and used no price data! It is simply a computation of the energy coming into the S&P. These forecasts can be made for any market, for any time in the future. This is a unique scientific technology.

Quoted from:
Al Larson (1997) – Energy Flow Theory.

See also:

Hans Hannula ( 1987) - In Search of the Cause of Cycles.

Hans Hannula (1991) - A Lunar Chaos Theory.

Al Larson (1997) - Your Electric Life.

Al Larson (2001) - The Sun and the S&P 500.
Al Larson - www.moneytide.com

DrAlLarson - YouTube Channel.

TPR - Financial Markets and Solar Activity.

Financial Markets & Seasonal Geomagnetic Field Variation | Hans Hannula

Any grade-school pupil can tell you when the seasons begin. In the northern hemisphere, generally, spring begins March 21, while summer begins June 21. Autumn begins September 23, and winter begins December 21. Actual dates may vary by one day in a particular year. So step one is simple.

The physical reason behind the seasonal cycle is the tilt of the Earth's axis. The 23.5-degree tilt of the Earth's axis causes more direct heating of the northern hemisphere in the summer, when the Earth tilts toward the sun. It causes less heating in the winter, when the Earth tilts away from the sun. This change in heating and cooling causes the seasonal weather patterns that we are familiar with.

 

Charged particles from the sun form a teardrop-shaped envelope about the globe called the magnetosphere.

Not so well known is the effect of the seasonal variation on the Earth's geomagnetic field. As the sun emits energy, charged particles flow outward, carried by the solar wind. As these particles sweep past Earth, they form a teardrop-shaped envelope around the globe called the magnetosphere.

There is a seasonal variation in two important parts of the magnetosphere. When the Earth tilts toward the sun in the summer, the charged particles can more directly flow into the north pole, where they affect the Earth's magnetic field. This effect is lessened when the Earth tilts away from the sun in the winter.

The second magnetic effect is on the magneto-tail, that part of the magnetosphere which streams away from the sunny side of the Earth. As the Earth tilts toward the sun, this tail "rides higher." As the Earth tilts away from the sun, the tail "rides lower." This affects how our moon, which moves in and out of the magnetosphere, interacts with the Earth's magnetic field.

Australian Government Bureau of Meteorology (2023):
The Seasonal Distribution of Geomagnetic Disturbances.

So what does this have to do with stocks and commodities? Scientific evidence suggests that these fluctuations in the Earth's magnetic field affect humans. Studies show that magnetic field changes are linked to blood PH changes, which in turn cause mood swings. Perhaps the psychological mood swings of traders are also subject to these magnetic field changes.

More obviously, the seasonal cycle could be expected to affect crop prices, such as those of wheat, corn and other commodities. Similarly, with most businesses running on a quarterly profit cycle, seasonal variations in the buying and selling of materials and equipment can be expected. Thus, on both a fundamental and technical basis, a trader can expect season price variations in stocks and commodities.

To perform step 2, mark the dates of the cycle on a chart with solid dots, and place them above or below the price as you estimate that price is high or low relative to what it was approximately one-fourth cycle earlier. Points do not necessarily have to alternate between high and low.

Now look for cycle "inversions." If two lows or highs occur in succession, the cycle has "inverted" between the points. A normal inversion point is halfway through the cycle.

Quoted from:
Hans Hannula (1991) - The Seasonal Cycle. In: Stocks & Commodities V. 9:11 (458-460).

 

See also:
Tianbao Zhou, Xinghao Li & Peng Wang (2021) - Chinese Stock Indices, Gann Time Theory & Solar Terms.

Chinese 24 Solar Terms for 2023.

 

 

CNN Business - Fear & Greed Index as of June 16, 2023.

The Heartbeat of the Sun│Valentina V. Zharkova et al.

Valentina V. Zharkova (2016) - We will see it from 2020 to 2053, when the three next cycles will be of a very reduced magnetic field of the sun. Basically, what happens is these two waves, they separate into the opposite hemispheres and they will not be interacting with each other, which means that resulting magnetic field will drop dramatically nearly to zero. And this will be a similar condition like in the Maunder Minimum.

 

What will happen to the Earth remains to be seen and predicted because nobody has developed any program or any models of terrestrial response – they are based on this period when the sun has maximum activity — when the sun has these nice fluctuations, and its magnetic field [is] very strong. But we’re approaching the stage when the magnetic field of the sun is going to be very, very small. 

Reference:
V. V. Zharkova, S. J. Shepherd, E. Popova & S. I. Zharkov (2016) - Heartbeat of the Sun from Principal Component Analysis and prediction of solar activity on a millenium timescale.

 

See also:

Anthony Watts (2016) - Solar physicist sees global cooling ahead.

Mikhail Gorbanev (2016) - Solar Activity and Economic Recessions. 

 Tom McClellan (2012) - Sunspots - The Real Cause of Higher Grain Prices. 

Henrik Svensmark (2007) - The Cloud Mystery.

Martin Durkin (2007): The Great Global Warming Swindle.

Judith Lean, Juerg Beer & Raymond Bradley (1995) - Reconstruction of solar irradiance since 1610: Implications for climate change.

 

Wheat Prices vs Sunspots, 1900-2012

Solar Activity and Economic Recessions, 1935-2012

The Sunspot Cycle and Stocks | Robert R. Prechter and Peter Kendall

In the early 1930s, statisticians Felix Shaffner and Carlos Garcia-Mata set out to refute economic theories (by W. Stanley Jevons in 1867 and others) suggesting a correlation between the 10.3-year sunspot cycle and changes in agricultural and business activity. They commented, “Indeed this evidence was so striking that we thought it necessary to conduct further investigations to prove the resemblance accidental. In this we were unsuccessful.” Their research appeared in the November 1934 Quarterly Journal of Economics. Based on a study of five sunspot cycles back through 1875, Shaffner and Garcia-Mata found that industrial production repeatedly peaked before the number of sunspots did. With respect to the stock market, they also looked at the turns in 1929 and 1932 and found a high degree of correlation. Charles Collins, R.N. Elliott’s original Wall Street benefactor and one of the great stock market students of the time, extended the stock market correlation with a longer-term analysis in the 1960s. Collins related 93 years of sunspot data to the trends of U.S. stocks over the same span and concurred that important stock market peaks consistently precede sunspot cycle maximums. His findings, “An Inquiry into the Effect of Sunspot Activity on the Stock Market,” appeared in the November-December 1965 issue of the Financial Analysts Journal. By anticipating the eventual peak in the sunspot cycle, Collins asserted that investors could avoid the most serious stock market declines.

 Figure 1.

When a bearish divergence in sunspot activity occurs while the stock market continues to rise, 

it often precedes a significant market downturn.

Sunspot counts range from a low of near 0 at the bottom of the cycle to 100 to 200 at their peak. One of the final contributions of Collins’ long career as an investment counselor and writer was the following early warning signal: “An important stock market peak has been witnessed or directly anticipated when, in the course of each new sunspot cycle, the yearly mean of observed sunspot numbers has climbed above 50.” Once the annual mean climbs above 50, Collins added, the largest percentage decline of the stock market cycle usually follows. Based on a 1964 bottom in the sunspot cycle, Collins speculated that 1967 would bring the count above 50 and thus indicate trouble ahead for the market. The threshold was, in fact, breached in 1967, which was fair warning of the speculative peak in 1968. In 1978, Collins’ sunspot indicator marked another important high that was followed by a sideways market over the next four years (which was a decline in PPI-adjusted terms). The next signal came in May 1988. The 1987 crash had already occurred, so the warning was late. However, stocks had a second selloff in 1990 that brought the Value Line index back to its 1987 low (see Figure 2), so the sunspot threshold did signal a period of relative weakness. Despite minor anomalies, then, Collins’ observations have remained applicable. Figure 1 shows the history of the sunspot count, the stock market and those recessions most closely associated with sunspot maximums.

The current sunspot cycle began in October 1996 and appears to be adhering closely to the typical pattern. In the first two years of the cycle, the Dow Jones Industrial Average did not experience any significant stock market corrections as it gained 32%, slightly below the century-long average of 37% for this phase of the sunspot cycle. The annual sunspot mean of 50 was reached in 1998. Considering the succession of peaks in all the major market indicators and indexes, from the advance/decline line in April 1998 to the NASDAQ in March 2000, the sunspots and the market appear once again to be very much in line with historical observations. Once Collins’ fair-warning sunspot signal has been given, the market may go to new highs, but it has entered a window of vulnerability that has been followed by stock market weakness in every instance over the course of the 20th century. The end of the time zone for a market top is just before the maximum monthly sunspot number, which is shown as a dashed line in the chart. Sunspot maximums have come 1 to 15 months after peaks in stocks. The average is 8 months. According to solar scientists, the next peak is due in December 2000, which matches the average duration over the last century. The declines that commenced in January (DJIA) and March (NDQ) 2000, then, are within the window for a turn. At this point, the stock market’s decline almost certainly has further to go because a two-month loss of 17% (to early March low) would be shorter in time than any corresponding decline and shallower than all but that of 1978, when stock prices were already depressed.

Stock market weakness associated with sunspot maximum tends to run several years, averaging 4 years and 4 months. In terms of return, the least bearish event (see table, page 2) was that of cycle 6 in the 1950s and early 1960s, when the Dow edged out a gain of 1.5 points over a period of almost 6 years. How much decline should we expect this time? The largest bear markets have come off sunspot maximums that are below the prior maximum. As you can see in Figure 2, the current sunspot cycle is doing exactly that. As with the sunspot cycles associated with the market highs in 1929 and 1968, which were followed by the two biggest bear markets of the century, the current sunspot cycle is topping out at a lower level than that of 1990. The recent bunching of the monthly sunspot count and the already-registered peak in the rate of change (see Figure 4) suggest a lower maximum sunspot in this cycle. 

 

 Figure 2.

The stock market often reaches its bottom and begins to rebound before sunspot activity hits its lowest point.

 
Links between sunspots and economic activity have been documented as far back as the 1720s. The shaded areas in Figure 1 show that every sunspot maximum this century has had a corresponding recession. In most cases, the recession begins when sunspots peak, which is after the top in the stock market. Only in 1938 and 1946 did the closest recession precede the sunspot maximum, but in the latter case, a second one occurred in 1948-49, roughly at the normal time. At this point in the current cycle, sunspots are approaching a peak, and a bear market in stocks is developing. The century of history shown here says unequivocally that today’s economy should be heading into the early stages of a recession or depression within a matter of months.

The stock market has never bottomed in this progression until a recession occurs. Thus, another reason to expect today’s new bear market to continue is that there has been no recession. Generally speaking, the periods from immediately before to immediately after each sunspot cycle maximum account for almost all of the major financial disruptions of the last century. In addition to the average of 4.4 years of stock market weakness, a sunspot cycle maximum and subsequent decline is generally followed by a financial crisis and another recession. At the beginning of the century, there was also a third recession at the sunspot lows.

By the time of the sunspot cycle minimum, the most severe turmoil for stocks and the economy is almost always past. In fact, buying opportunities have presented themselves ahead of the minimum point in every cycle since 1910. The dotted lines in Figure 3 show the same relative position of the sunspot frequency at important market bottoms. These bottoms, which include the start of Supercycle ) in 1932, Cycle III in 1942 and Cycle V in 1974, occurred when the rate of change in monthly sunspot counts decelerated to an average of 26.5% of its prior level (using a four-month moving average to smooth sunspot volatility). This bottom is due next in July 2004. Based on an average market effect of 4.4 down years, the current stock-market contraction should see a preliminary low in the first half of 2004. Given the potential, this headline from the July 17 USA Today strikes us as optimistic: More than likely, the disruptions have just begun, at least in the social sense.

 Figure 3.

Market excitement frequently peaks in response to the rate of change in sunspot activity.

Some effects from solar radiation are well documented. Sunspots disrupt satellite systems, radio transmissions and electric power grids. In the realm of mass human activity, the sun’s role has been a source of speculation since the dawn of civilization. In 1926, Professor A. C. Tchijevsky traced the sunspot activity back through 500 B.C. and found that it produced nine waves of human excitability per century. “As sunspot activity approaches maximum,” Tchijevsky found, “the number of mass historical events taken as whole increases.” Part II of The Wave Principle of Human Social Behavior describes the basis of the Wave Principle and unconscious human herding behavior as a function of the human limbic system, which is the gatekeeper of emotion within the human brain. However, the limbic system is not necessarily independent of outside forces. As the radiating center of our solar system and the wellspring of practically all the energy on the planet, the sun is certainly an intriguing contender for some degree of external mass mental influence.

Why does the stock market typically peak before sunspots do? One very plausible explanation is that the collective tendency to speculate peaks out along with the rate of change in sunspot activity. If sunspots affect humans’ positive-mood excitability, that appears to be the point of maximum effect.

 

Figure 4.

When we explored this possible explanation, we found something additionally interesting. Figure 4 shows that as the solar radiation thrown off by the sun increases to a maximum rate (shown by our optimized 39-month rate of change in sunspot numbers), the human urge to speculate in general hits a fever pitch. Two months after the rate-of-change peak in 1916, the stock market established an all-time high that was not materially exceeded until the sunspot count was accelerating again in the mid-1920s. The next rate-of-change peak in October 1926 preceded the final stock market high by a full three years, but the speculative fever that accompanied the Florida land boom ended almost coincidentally, about two months earlier. The next peak was a double top that finished in February 1937, one month before a major stock market high. In 1947 and 1967, the rate of change peaked within 13 months of major stock peaks. In 1957, the peak coincided with with the all-time high in the advance-decline line, which stands to this day. The September 1979 peak was four months before a century-long high in precious metals prices. The August 1989 peak accompanied the all-time high in the Nikkei and the end of a big real estate boom in California and Japan. Since scientists’ grasp of the sunspot cycle is based on empirical observation rather than an understanding of what causes it, there is no way to verify that a rising rate of sunspot activity is behind these outbreaks. However, the speculative fall-off in the wake of every peak since 1916 is itself strong evidence of an effect. The latest peak rate of change came in December 1999, and that sets up a test. Will this peak in sunspots mark the end of the greatest mania in the history of the stock market? So far, the answer is “yes,” as the Dow topped a month later and the more speculative NASDAQ peaked in March. A ninth straight correspondence will not prove the case, but it will add to the empirical evidence.

 

 "Shortly before a sunspot cycle hits bottom, stocks turn up."

 

 Prices S&P 500 vs Solar Cycle 1916-2022.

 Quoted from:
Robert R. Prechter  Jr. and Peter Kendall (2011) - The Sunspot Cycle and Stocks.