World Markets Weekend Update: The September Bounce Accelerates

For the second consecutive week, all eight indexes on my world watch list finished with gains, the first time that's happened this year. In fact, prior to the last two weeks there have only been three other Friday closes when all eight posted gains: the first Friday of 2013, Friday May 10th, and Friday July 12. The Shanghai Composite was the week's big winner, with a 4.50% advance. The Nikkei finished second with a 3.92% gain. The S&P 500's 1.98% was only good enough to be the top of the second tier. The FTSE posted the smallest gain, a perfectly respectable 0.56%.

Despite its huge rally, 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 35.58% from its interim high of August 2009. At the other end, the DAXK nudged out the CAC 40, which dropped to second with the A&P 500 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. Over the past week the Nikkei rose above the 28.2% Fib but retreated after bumping in the Fib 50% at is Thursday intraday high. 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 off its 2013 peak gain of 50.33%. Still, that's over double the YTD gain of the runner-up S&P 500. Only the Shanghai Composite remains in the red YTD, down from three indexes last week. The weekly advances of the BSE SENSEX and Hang Seng were enough to move them back into the green.

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.