One of the things that is disappointing about technical analysis is its constant default towards superstition and nonsense. This silliness drags the entire profession down and when technicians take umbrage at the way they are viewed they only have themselves to blame.
A reader asked whether Charles Nenner, self-described as “the talk of Wall Street since accurately predicting some of the biggest moves in the Markets over the past few years,” accurately forecasts equity and commodity markets. We consider the following:
- In his July 2007 discussion of the “Nenner Methodology at the Bloomberg Studio”, Charles Nenner cites sunspot activity as a specific key indicator for equity returns. Per this source, he believes that the sunspot cycle correlates strongly with equity markets via the predictable effects of magnetic field disturbances on investors.
- In “Sunspots Predict ‘Major Crisis’ After 2013: Chartist”, he states: “If there is a high intensity of sunspots, markets rise, if their intensity lowers, markets go down because sunspots affect people’s mood.”
Is there a reliable relationship between sunspot activity and stock market returns? Using monthly averages of daily sunspot counts and monthly levels of Shiller’s S&P Composite Index(also monthly averages of daily levels) during January 1871 (limited by the Shiller data) through October 2018, we find that:
The following chart plots monthly sunspot activity and the S&P Composite Index, with the latter on a logarithmic scale. There are about 14 11-year sunspot cycles in the full sample, with the peak at the end of the 1950s strongest and the most recent peak the weakest. Visual inspection reveals no obvious relationship between the two series.
More here – CXO Advisory Group