Global stock market declines – threatening moving averages

Wednesday, June 24th, 2009

Considerable media coverage has been given to the S&P 500 Index flirting with its key moving averages (remember to poll your vote here). However, it makes for interesting reading also to consider the moving averages of non-US stock markets.

The table below provides a summary of the 50- and 200-day averages pertaining to a number of global indices. The orange shading indicates indices still trading below their moving averages and shows the percentage gain required in order to reach the moving-average line. Conversely, the green shading shows those indices that have already breached the moving averages to the upside and the numbers indicate the percentage decline that will reverse the break.

Click here or on the table below for a larger image.

The 50-day moving average is an indicator of the secondary trend. However, the longer-term 200-day moving average is of more importance as an indicator of the primary trend. Although it is a lagging indicator by construction, it fulfils a useful role in keeping investors on the right side of the long-term trend.

It is important to note that three conditions must be met in order to flash new equity bull markets, namely (1) the index in question must penetrate the 200-day average, (2) the 50-day average must cross the 200-day line, and (3) the 200-day average must turn upwards.

As far as the US markets are concerned, the current situation is that only the Nasdaq Composite Index is trading above both its 50- and 200-day averages, although the other major US indices are mostly either on or within close range of their averages.

Of the other mature markets on the table above only the Copenhagen KFX Index, the Dublin ISEQ Index and the Spanish IBEX 35 Index are trading above both averages. The other indices are a mixed bag, but have mostly started encountering resistance at the averages prior to the declines of the past few days.

Most of the emerging markets are above their respective 200-day moving averages, but a number - Brazil, Russia, Mexico, South Africa, Venezuela, Taiwan and South Korea - have fallen back to below their 50-day lines. In most cases, the 50-day lines are still above the 200-day lines.

Studying chart patterns of the various global bourses leads one to conclude that in the case of most emerging markets base formations have possibly been completed. However, in order to argue that the cycle lows are in, it is imperative that the key 200-day support should hold. As far as mature markets go, the picture will remain inconclusive until the primary trend indicators turn positive.

Tags: Bull Markets, Close Range, Copenhagen, Emerging Markets, Global Indices, Global Stock Market, Ibex 35, Iseq Index, Kfx, Lagging Indicator, Mature Markets, Media Coverage, Moving Averages, Nasdaq Composite Index, Percentage Decline, Percentage Gain, Shading, Spanish Ibex, Stock Markets, Term Trend
Posted in Emerging Markets, Markets | No Comments »

Tim Bond on China and the Fed’s “punch bowl”

Wednesday, June 24th, 2009

Tim Bond, head of asset allocation at Barclays Capital, discusses in the video clips below the outlook for Chinese growth, as well as government bond yields and when the Federal Reserve Board will start raising rates. FT’s investment editor John Authers conducts the two-part interview that also covers a number of other topical issues.

Part 1:
Will Chinese domestic growth be the saviour of the global economy?

Click here or on the image below to view the interview.

Part 2:
Are bond yields normalising? When will the Fed start raising rates?

Click here or on the image below to view the interview.

Source: John Authers, Financial Times, June 22 and June 23, 2009.

Tags: Asset Allocation, Barclays, Barclays Capital, Bond Yields, China, Chinese Growth, Federal Reserve, Federal Reserve Board, Financial Times, Global Economy, Government Bond, Image, Interview Source, John Authers, June 23, Punch Bowl, Saviour, Tim Bond, Topical Issues, Video Clips
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