Global stock indexes running on fumes

When I’m looking at larger trends I like to visit the Bloomberg global stock market pages, rather than stare at the Dow all the time. To that end, here’s a tour of a few indexes from outside the US.

The German DAX always looks like the S&P 500. 5-year view:

Source: Bloomberg, for all charts.

Brazil’s Bovespa, 5-year view. Looks like a huge double-top. Note, the February decline busted the uptrend, and there have been no new highs since January:

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Madrid’s IBEX 35 has been struggling:

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The Athen’s stock exchange is even weaker of course:

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Here’s the Russian Trading System index, possibly stalling out at a typical retracement level for a post-crash bounce:

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The Swedes are feeling frisky, with a recent pattern that looks like the high-flying secondaries in the US:

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Moving east, we see that Chinese stocks topped back in November:

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The Nikkei’s bounce has been pretty weak relative to most others, and its ascent has been shallow and wobbly since last June:

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Nothing looks particularly bullish about the Australian stock market. Its top so far remains back in January, and it’s only barely higher than last October. What will happen when their real estate bubble pops?

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Here’s India’s Nifty Fifty, back near peak bubble levels and asking for another wallop. Not much reward for a whole lot of risk here since October.

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The general impression here is that these markets have simply made giant bear market rallies as part of a de-risking process from the euphoria of 2005-2007. There is no fundamental value in stocks at these prices (the S&P 500 is yielding under 2%, and that’s among the better returns out there), and if I am gauging mood correctly we are not beginning another great bubble but still deflating the last one.

During the winter of 2008-2009 a lot of these indexes formed solid, tradeable bottoms that were tested repeatedly (look at 2500 above in the Nifty for instance) or outright divergences (see the Bovespa). This was a strong clue that we were firming up for a rally to correct the whole decline, despite the US dipping to a deep new low in March. Well, we have pretty strong resistance levels and divergences since fall in many of these indexes, perhaps warning us not to take the highs in the Nasdaq and Russell 2000 too seriously. After all, there is no more speculative market than China, and it’s been very weak for almost six months. Even the crazy Bovespa, though back at nosebleed levels, has not made any headway since December. Greece has already crashed again, and Spain is thinking about it.

A year ago, there was a wonderful technical case for being bullish. That’s now completely gone, and in my opinion we now have nearly as strong a case for being bearish. These markets are more overvalued, more overbought and technically weaker (broken up-trends, waning momentum ) than at any point since late 2007. It is astonishing that they have rebounded as far as they have, but that does not mean that they will continue – given the character of the advances since last summer, these heights only provide more potential energy for the next decline.

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6 thoughts on “Global stock indexes running on fumes

  1. Mike, Indonesian Stock Exchange (JCI:IND — Bloomberg or ^JKSE – Reuters) is on the verge of registering a new high. Is this the only stock market in the world to do so?

    2007 high was 2830. Last Friday it closed at 2813.

  2. Copper is now over 3.50. A new high in this countertrend rally. I guess this is kind of a bad sign for the bearish short-term case.

    However, metal stocks mostly don’t make a new high (at least not yet)… so it may create a negative divergence. One particular ETF I’m watching is XME. With another prominent copper stock FCX. I guess this divergence is the best case for the bears.

  3. I know a wee bit of the Indonesian stock market as some relatives live there. During the 2008 crash, the government limited every listed stock’s price decline by 10% per day. That’s why you get a funny chart with gap downs and short candles everyday. The currency dropped about 30% against USD during the crash.

    Banking stocks are reaching new highs during the 2009-10 bounce. Banking is the largest sector in the stock market. But apparently, during the full course of 2009, my relative said that people kept complaining banks were unwilling to lend and that their interest rates are so high. No wonder… the government kept selling bonds yielding 10%. At the heights of the 2008 crisis, it was selling dollar-denominated bonds at ludicrously high yields (don’t have the detail here…). Apparently banks there are profiting big time from the govt bonds.

    Indonesia was praised as one of the few countries claimed to have survived the GFC well (large positive GDP)… besides China & India and perhaps Brazil.

  4. Price data is not easy to find, but iron ore is experiencing a huge bubble and the spot market is now trading well above its 2008 peak. A lot of juniors are getting ready to spend vast amounts of capital to tap extremely marginal deposits in Western Australia. This (along with the general commodity rally) probably also has a lot to do with where the Bovespa has gone.

    I think copper is still below the December highs but not by much — it seems to me we’ll see new highs before putting in the final top and turning down.

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