Global Stock Markets: Halloween Relief or More?

I will be covering a global stock market performance round-up after the month end, but thought it would make for interesting reading to briefly review the action of the past three days.

The numbers speak for themselves, showing the MSCI World Index and the MSCI Emerging Markets index surging by 14.2% and 23.5% respectively since Monday’s closing levels. Strong stuff indeed, but these rallies still leave the two indices down by 43.4% and 58.1% respectively since the highs of October last year.

The strongest performers over the past few days were Russia (+37.0%), Hong Kong (+30.1%), Brazil (+27.2%) and Japan (+26.1%). This begs the question: Are these bourses back in bull markets according the traditional definition of a 20% improvement?

On the other end of the scale, the following markets were left behind: New Zealand (-0.6%), Venezuela (-0.6%), China (+2.3%), the Russell 2000 Index (+4.2%) and Australia (+5.0%).

Here is Richard Russell’s (Dow Theory Letters) take on matters:

Things are looking better. After a series of 90% down-days, on Tuesday, we had a 90% up-day. Since then, the market action has been good. With bonds appearing to have topped out, I’m beginning to think that there’s a good chance the market has bottomed. Adding to the bullish case, Lowry’s published a significant contraction in selling pressure today.

I give the current rally the benefit of the doubt provided the recent lows (8,176 on the Dow Jones Industrial Index and 849 on the S&P 500 Index) are not taken out. However, it remains difficult to say whether a secular low has been reached in an environment of economic and profit recession. At least, the extent to which central banks, governments and the IMF are becoming involved to fend off a total economic meltdown is a sign that we could be in a bottoming-out phase of the bear market.

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Comments

[gabe borens...:]

The word Depression has been used so many times by the investment community and the Newscasters(CNBC),so that clearly the current market levels reflect the worst and that includes the earnings .
The relative dollar strength is reflective of the theglobal confidence in the U.S economy and the system.
It is difficult to treat all of the economic zones eqaully as Europe,Asia nad Emerging markets are cyclically behind the U.S economy.
The U.S was the first to identify and aggressively address the issues.
As we are the global locomotive(still) ,cyclically the other economies are vulnearable untill the U.S recovers.
Since the dollar is the global magnet(flight to quality),the U.S recovery will be fuelled by the foreign investors as well,then other economies will follow,although relatively speaking,the rates outside the U.S are too high.
On any given day ,the downside risk(stock market) exists ,but once we get past the weaker data (discounted),the market will stage another record rally.
The measures in place are the economic rocket fuel-from that perspective the economic zones are behind the U.S.
The only thing to fear is the fear itself.

2008 Oct 31 08:19 AM

[peterthepai...:]

the only thing not to fear is fear
...fools rush in man...if you must buy...buy a bit at a time for what may be a very long while...think japan!

2008 Oct 31 09:39 AM

[investor88:]

I think peterthepainter has a balanced view of the markets, if you must buy buy slowly and patiently...think Japan!

Beginning with Warren Buffet, there are more and more bulls. We cannot be sure, just have to be cautious and observe carefully as the markets evolve. Technicicans say follow the market, let it indicate where it is going. This sounds simple like "buy low sell high" but it is just as difficult to carry out in practice.

Someone says the bottom of the markets will be 2011 following some some long cycle theory and demographics of aging baby boomers. Sounds filmsy but it is a possible scenario, although there will be bear rallies every now and then.

2008 Nov 01 10:21 AM