World Markets Update: Mixed Bag With A Negative Bias

After four weeks of a broad-based rally, during which a minimum of seven of my eight featured indexes posted a gain, last week was a mixed bag with a negative bias. The Hang Seng was the one outstanding performer with a 2.84% advance for the week. France's CAC 40 was a distant second, up 1.11%, and the Shanghai Composite was a close third with a 0.91% gain. The S&P 500 finished the week fractionally below the flat line, but four indexes lost from one to three percent. The big loser was Japan's Nikkei, the "drama queen" index of 2013.

The Shanghai 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 a dismal 42.07% from its interim high of August 2009. The S&P 500, at the other end, is fractionally off its all-time closing high set last Monday.

Here is a closer look at the YTD performances, which continues to be dominated by the astonishing volatility of the afore-mentioned Nikkei drama queen.

For the past two weeks I've included a snapshot of the Nikkei with its Fibonacci retracement highlighted. The behavior of the index against this metric has been quite fascinating. Friday a week ago the index fell 1.48% to land on Fib 61.8% support, one that served as a trampoline until this Friday's 2.97% selloff, which took the Nikkei down a notch to the Fib 50%. It will be interesting to see if 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 over the past few months, despite its big correction and subsequent volatility, puts it solidly in the top spot with a 35.93% YTD gain but well off its 2013 peak gain of 50.33%. Unchanged from last week, there are two indexes in the red YTD (the two from China).

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, 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.