The Sun Spot Cycle

There has long been thought to be a correlation between the Sun Spot Cycle, business conditions and therefore the Stock Market.

But what are Sun Spots?

Sun Spots are temporary dark areas on the Sun. Looking like spots from earth, they can in fact be ‘planet-sized’ areas that emit larger than normal electromagnetic waves that can be detected on earth.

It’s this varying amount of electromagnetic energy on the earth that is said to affect behaviour and therefore business conditions.

Sun Spots numbers are recorded by the Australian Space Weather

Forecasting Centre, but the raw numbers have a lot of noise in them i.e. they jump around a lot. A Smoothed Sun Spot number is more usable when trying to correlate between it and other data.

The Smoothed Sun Spot number is shown below, together with the All Ordinaries Australian Share Market Index (the All Ords has a longer history than other Australian indices). 

So does an increase in Sun Spots lead to an increase in prices and a decline cause a crash?

Not quite.

There does appear to be some sort of relationship.

From the 1980’s, the Sun Spot Cycle fell to around 1986 - the low was actually September 1986.

As is common knowledge in 1987 ‘crash’ saw sharply lower prices, but this was at a time the Sun spot Cycle was beginning to rise.

The Sun Spot Cycle peaked in November 1989, with the Australian Stock Market peaking in October on a closing basis. The Australian stock market saw declining prices into January 1991, falling nearly 30%. With a slight rise in the Sun Spot Cycle, the market rose, only to fall again around 19%, as the Sun Spot Cycle started a long decline to around mid 1996.

The Sun Spot Cycle turned up into the April 2000 and November 2001 peaks, with the Australian stock Market peaking in a double top in July 2001 and March 2002. Prices declined 12 months from here into the March 2003 lows, a drop of 20%.

Another long decline in the Sun Spot Cycle saw a bull market run to the pre GFC highs where the market peaked in October 2007 (closing basis) and then lost around 50% of it’s value into the November 2008 orthodox low (an Elliott Wave pattern ended but price did go lower in the following pattern) & March 2009 final price lows, with the Sun Spot Cycle low in December 2008.

Again, the Sun Spot Cycle rose, with another double top like pattern with the second high in April 2014 - a few months before I have an orthodox top in the market in August 2014. The Stock Market saw another decline of approximately 11% from the orthodox high & 15% from the final high into the February 2016 lows.

With the Sun Spot Cycle turning up again, we saw the Stock Market rise into the pre C0V1D crash high in February 2020, with the March 2020 low also being the low for the Sun Spot Cycle seeing a Stick Market fall of approximately 33% on a closing basis.

The Sun Spot Cycle turned higher again, into the current highs (February 2025) with the latest estimated values predicting a fall in the Sun Spot Cycle.

This is illustrated below.

It would seem that a falling or rising Sun Spot Cycle occurs when the Australian Stock Market rises. 

Prices fall after Sun Spot Cycle highs and they also fall, at times heavily, into the Sun Spot Cycle lows (with quite a few months lag in the 1980/1990’s).

Check back for future chart updates.