Good, it works.
Your frequency is extremely low at 8.69Hz so your 'scope shows the peak detector output voltage ramping down between half-wave pulses.
Try removing Q3 and/or R14 to remove the Automatic Gain Control compression. The AGC allows a signal 10 times higher to activate the same LEDs as the lower level.
Do not exceed a peak input voltage of 2.1V which is only 0.276W RMS in an 8 ohm speaker. The value of R9 must be increased to allow higher input levels.