Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Stock Market Performance at the Mercy of Grim Corporate and Economic Data

Stock-Markets / Investing 2009 Feb 02, 2009 - 07:43 AM GMT

By: Prieur_du_Plessis

Stock-Markets

Best Financial Markets Analysis ArticleAn avalanche of worse-than-expected economic and earnings data again put pressure on Wall Street during the past month, resulting in four straight down-weeks and the worst performance of the major US indices for January on record.

“As January goes, so goes the year” is one of the most frequently quoted sayings about seasonal trends in the stock market. With the Dow Jones Industrial Index down by 8.8% and the S&P 500 Index 8.6% lower, the year is not off to a promising start.


Despite frantic actions by the Fed and other central banks to unclog credit markets and restore confidence in the world's financial system, the MSCI World Index and MSCI Emerging Markets Index fell by 8.8% and 6.6% respectively during January.

The performances in the table below are given in local currency terms for different measurement periods ended January 31.

From the highs of late October 2007 until the November 20 lows, mature markets have outperformed developing markets, as shown by the declines of 54.1% for the MSCI World Index and 65.3% for the MSCI Emerging Markets Index. The relative-strength graph below clearly shows this outperformance (i.e. declining trend), but the period since the November lows has witnessed emerging markets reclaiming lost ground (i.e. rising trend).

In local currency terms, the best-performing bourses since the November 20 lows have been Russia (+23.8%), Oslo (+18.8%) and Brazil (+17.7%). However, the two markets still in the red - Helsinki (-2.2%) and France (-0.2%) - have had much less to cheer about.

Considering the month of January, the top three performers were all BRIC countries, namely China (+9.3%), Brazil (+4.7%) and Russia (+2.5%). Although India closed the month on a strong note (up 8.6% during the fourth week), the Bombay Sensex 30 Index still lagged its BRIC counterparts for the month. The year-to-date performances of these countries, together with the MSCI Emerging Markets Index, are shown in the graph below.

Source: StockCharts.com

It should be noted that the Chinese stock market has been closed over the past few days in celebration of the Lunar New Year. It will be interesting to see how this market starts the Year of the Ox on Monday as the chart pattern shows arguably the best base formation of the major market indices. The Shanghai Composite Index (1,991) is also challenging its three-month highs and is within close reach of the roundophobia level of 2,000 for the Shanghai Composite Index.

The gains/declines mentioned above are all in local currency terms. However, converting the movements to US dollar shows a somewhat different picture for the non-dollar countries (see table below). Over the one-month period (US Dollar Index up by 5.8%), the European and emerging-market indices fared considerably worse in dollar terms than in local terms.

With the Russian ruble falling out of bed, the Russian Trading System Index declined by 15.3% in dollar terms over one month, whereas it recorded a gain of 2.5% in local currency terms. (Since the November 20 low, Russia has swung from the first position (+23.8%) in local currency terms to the last place (-4.7%) in dollar terms.

Back to the US stock market, the bar chart below (courtesy of Bespoke ) shows the performance of the ten S&P 500 sectors in January. Financials were a large part of the overall declines, as the sector had fallen by 26.5%. On the other hand, Utilities and Health Care were the best-performing sectors, declining by only 0.8% and 1.3% respectively.

Source: Bespoke , January 30, 2009.

Notwithstanding the improvement since the November lows, it remains too early to tell whether a secular low has been recorded. The chart below shows the long-term trend of the S&P 500 Index (green line) together with a simple 12-month rate of change (or momentum ) indicator (blue line). Although monthly indicators are of little help when it comes to market timing, they do come in handy for defining the primary trend. An ROC line below zero depicts bear trends as experienced in 1990, 1994, 2000 to 2003, and again since December 2007. Having said that, the level of the indicator is grossly oversold.

Stock markets are still caught between the actions of central banks furiously fending off a total economic meltdown on the one hand, and a worsening economic and corporate picture on the other. Failing stronger market breadth and further evidence of the thawing of the credit markets and the world's financial systems starting to function normally again, investor confidence will probably remain depressed. While I remain distrustful, I am not averse to selective stock picking - picking out the choice morsels, so to speak.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

By Dr Prieur du Plessis

Dr Prieur du Plessis is an investment professional with 25 years' experience in investment research and portfolio management.

More than 1200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns (including his blog, Investment Postcards from Cape Town : www.investmentpostcards.com ). He has also published a book, Financial Basics: Investment.

Prieur is chairman and principal shareholder of South African-based Plexus Asset Management , which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries.

Plexus is the South African partner of John Mauldin , Dallas-based author of the popular Thoughts from the Frontline newsletter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental Index™ methodology in the Pan-African area.

Prieur is 53 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town , South Africa . His leisure activities include long-distance running, traveling, reading and motor-cycling.

Copyright © 2009 by Prieur du Plessis - All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Prieur du Plessis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules