Global stock market moving averages – a mixed picture

By Prieur du Plessis, on October 12th, 2011 posted in: Investment, Stocks

A quick whizz around the moving averages of global stock markets makes for interesting reading. Specifically, I have considered the standard deviation from the 50- and 200-day moving averages for both mature and emerging stock market indices.

As shown in the tables below, the key conclusions are as follows:

Most developed markets are again trading above their 50-day moving averages (indicating the secondary trend), including the MSCI World Index and all the major U.S. indices. It is not surprising to see markets such as Greece and Portugal bucking the trend, with Japan also an underperformer.

The recovery of emerging markets is lagging that of the developed ones, and most of these markets are still below their 50-day averages. Pakistan, South Africa, Turkey and Venezuela are notable exceptions.

Considering the 200-day moving averages (an indicator of the primary trend), all the developed markets with the exception of New Zealand are below their averages, with Austria, Greece and Singapore more than two standard deviations in the red.

As far as emerging markets go, only two – Pakistan and Venezuela – are above their 200-day averages. The MSCI Emerging Markets Index, as well as three of the BRIC countries – China, Brazil and Russia – is more than two standard deviations under water.

I would not be surprised to see a further recovery in stock markets over the next few weeks, with those markets most deeply oversold relative to their 200-day moving averages offering the strongest recovery potential. But until we see the majority of the indices (as well as the majority of individual stocks) breaching their 200-day lines, one would be hard-pressed to talk of a resumption of the bull market.

Developed markets – ranked by standard deviation from 50-day moving average