Thursday, 31 May 2012

Australian shares underperform US, German, and Japanese shares so far in 2012

The following chart shows the main stock indexes for Australia (ASX 200), the US (S&P 500), Germany (Dax), and Japan (Nikkei) valued in US dollars for the year so far. Australia is clearly underperforming the others. I can't help but wonder what this means. The value of the ASX 200 is largely determined by movements in the share prices of the large banks and resource companies, so my take on this chart is that global investors are more worried about Australian banking's exposure to a weakening housing market and Australian resource companies exposure to a slower growing China, than they are about Germany's exposure to risk from the ongoing European fiasco. Food for thought.

EUR/USD is testing trend line drawn from 2001 and 2002 lows

DAX looks to have begun another leg lower, other markets likely to follow

The hourly candlestick chart for May shows that the German DAX has broken below the trend line drawn from the recent lows, a sign that the next leg lower could be beginning for this market and other closely correlated stock indexes around the globe.

Next chart zooms out to the daily candlestick for the past year. Regular readers will know that the DAX has been testing the trend line drawn from the September low. The hourly chart trend line break is an early clue that a decisive daily chart trend line break could be directly ahead.