World Markets Update: Back In Rally Mode

Despite the political fisticuffs in the US over the government shutdown and debt ceiling, all eight world markets on my watch list closed the week higher, the sixth such occasion in 41 weeks so far in 2013. India's SENSEX was the standout with its 3.08% advance, followed by two other Asia-Pacific indexes -- the Nikkei up 2.71% and the Shanghai Composite up 2.46%. Two of the European indexes hit new highs; France's CAC 40 rose 1.34% to an interim high, and Germany's DAXK hit an all-time high with its 1.18% gain.

The Shanghai Composite remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. See the table inset (lower right) in the chart below. The index is down 35.81% from its interim high of August 2009. At the other end, the DAXK and CAC 40 are at new highs, with the S&P 500 1.29% off its all-time high set the three weeks ago.

Here is snapshot of the YTD performances, with the volatile Nikkei as the ongoing attention-grabber.

For the past several weeks I've included a daily chart of the Nikkei with its Fibonacci retracement highlighted. The behavior of the index against this metric remains fascinating. On Tuesday and Wednesday of last week the index did a perfect bounce off the Fib 38.2% level. This Fibonacci "jungle gym" continues to be a feature of the Abenomics playground.

Here is a table highlighting the 2013 year-to-date gains, sorted in that order, along with the 2013 interim highs for the eight indexes. The strong performance of the Japan's Nikkei, despite its big correction and subsequent volatility, puts it solidly in the top spot with a 38.57% YTD gain but below its peak gain of 50.33%. Only the Shanghai Composite remains in the red YTD.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai SENSEX and Hang Seng) up to their 2007 peaks is evident, and the SENSEX remains by far the top performer. The Shanghai, in contrast, formed a perfect Eiffel Tower from late 2006 to late 2009.

Check back next week for a new update.

Note from dshort: I track Germany's DAXK a price-only index, instead of the more familiar DAX index (which includes dividends), for constency with the other indexes, which do not include dividends.