Emerging Markets Diverge Whilst the U.S. Markets Dive

Weak U.S. economic data, strong signs of slowing growth in China and gold plummeting over 9% at the time of writing has compounded to send waves of fear through the market.  With most U.S. indices down around 2% at the time of writing, is now a time to be fearful?

In short it could be, take a look at this chart. >

With the India and China stock markets diverging from the rest of the world now is a time to protect your gains.
With the India and China stock markets diverging from the rest of the world now is a time to protect your gains.

Here we plot the major stock market indices against each other to assess performance since the start of the year.  What we can see quite clearly is that rather than leading the charge the Indian and Chinese markets have been diverging with the rest of the world, down 7.5% compared with the U.S. and the German DAX who have registered between 5% and 8% gains.

In this context you could use the emerging market as a leading indicator to suggest that there is downside to come in the U.S. and European markets.

Japan seems to be the strong outlier with over a 20% gain since the start of the year.  This is a clear sign that the monetary easing in Japan has unleashed a lot of the pent-up stagnation that we have seen in Japan over the past 4 years.

Now is the time to protect your gains and wait for the dust to settle before picking up some bargains.

 

2 COMMENTS

  1. I am agreed the bear market will come too in Indonesia. My data of indonesia index about new high from week to week give not good signal. With datas:

    1.New High and New Low(friday,3/22/13, NHi about 39stocks; thursday,3/28/13=45stocks; friday,4/5/13=34stocks; friday,4/12/13=31stocks with new low=1stock;friday,4/19/13=35stocks with NLw=4stocks and friday,4/26/13=18 with NLw=5 stocks. We see New high decreases and New low appears more significant.

    2.Plus and Minus Data
    from 4/15/13with Plus + Minus=sum:(-120);(-39);47;5;(-41);(-67);(-108);41;(-53);52 at this friday,4/26/13.
    we see from day to day minus very dominant

    3.But our Indonesia composite index, now up trend and has break all time high and create new hi and now side ways at hi resistance.

    How it can be?
    Are all above data is signs of first appearance of bad signals and time to out?

    I am only a half year learning and trading stocks in Indonesia. And much things must learned to be good and make much gain.

    Only this datas I can share to you and thank for much learning articles that I found in your web site.

    Regards,

    Andry Ignesius Eoh

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