Trader’s Narrative

Don’t Miss This Opportunity!
Throw your hat in the ring for the latest giveaway courtesy of the
Trader’s Business Plan

Man does not live by bread alone.

And neither is the US stock market the only market out there.

But we usually tend to act as if it was the only one that counts. One of the many lessons I learned from Weinstein’s excellent book: Secrets for Profiting in Bull and Bear Markets, is to monitor global indexes. Cheesy title, but excellent book - if you don’t have it, get it today.

This takes on extra importance at important inflection points - which are difficult to spot in the moment, as you’ve no doubt noticed. While the US market is probably the most important in the world, due to the interconnectedness of our world, it can not decouple from the rest. So by comparing it to the others, we can gain insight into bull and bear markets.

So with that in mind, below is a (not so random) walk through the world’s major stock markets. First, let’s take a look at the European exchanges, then Toronto and the South American Indexes and finally, Asia.

Since looking at so many charts can be dizzying, I’ll keep tabs on a couple of specific technical criteria. For example, the slope of the moving averages as well as whether price is uptrending or downtrending (making a higher high and a lower high or vice versa).

FTSE (England)

• made a new low in March 2009 (still downtrending)
• yet to break above January 2009 highs
• slope of 200 day moving average is down
• 50 day moving average is below price & climbing

CAC 40 (France)

• made a new low in March 2009 (still downtrending)
• yet to break above January 2009 highs
• slope of 200 day moving average is down
• 50 day moving average is below price & climbing

Continue reading ‘A Walk Through World Stock Markets’

There is a very interesting study coming out in The Journal of Finance that looks at the connection between wins and losses in the World Cup and the respective stock markets of the countries involved.

Authored by economists Edmans, Garcia and Norli, the paper does some serious number crunching to show that losses in the world cup translate into stock market declines the next trading day. And as you would expect, the more that is at stake, the larger the decline that the loss causes:

As noted in the graph above, the effect of wins and losses is not the same magnitude. Human nature being what it is, disappointment is more bitter than the sweetest victory.

So I guess we now have the “World Cup Effect” to add to our basket of behavioral finance anomalies. The choice of the world cup is very wise as it is the most widely played, watched and followed sports event on earth - even larger than the olympics. Other sports just don’t evoke the same visceral reaction:

Source: Canadian Business magazine.

So does this mean with the elimination of Germany we short the DAX and go long the Mibtel? What about Brazil’s game against France? Long CAC and short Bovespa? The more pressing question for me is where in the world was the Brazilian defense during that game? Sheesh.