World Markets Update: The Early September Bounce

Last week hosted a strong rebound for the major world indexes on my watchlist. All eight finished with gains, the first time that's happened since the week ending on July 12, and the average gain was 2.70%, the best since the 2.75% weekly average on the first Friday close of 2013. The S&P 500's 1.36% gain was only good enough for last place. Hong Kong's Hang Seng was the top performer with a 4.09% advance, with Japan's Nikkei 225 and India's SENSEX in a near dead heat for second with gains around the 3.5%. The three European indexes all finished in the two-percent plus range.

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 still down 38.35% from its interim high of August 2009. At the other end, the CAC 40 replaced the S&P 500, which dropped to second with the DAXK close behind.

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. We see that on Thursday the index tested resistance at the 50% retracement and was stopped in its tracks. 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 33.34% YTD gain but well off its 2013 peak gain of 50.33%. Still, that's substantially above the YTD gain of the runner-up S&P 500. The indexes in the red are the same as last week, but the Hang Seng's rally has moved the index within a hair's breadth of positive territory.

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.