Shareswatch Australia

It may appear to some investors that the Australian stock market has started 2012 in the same volatile manner as we have become use to over the last few years, however trading so far this year has been fairly calm.  An optimist might believe that this is an indication that the markets are finally settling down though I fear we are simply enjoying a period of calm before we enter a stormy phase again.

It may not appear to some investors that the stock market is functioning normally again, but the manner by which the  recent correction was quickly reversed indicates that in fact things are getting back to normal. Certainly there is a long way to go before the ASX All Ordinaries crawls back up to 2007 levels, but at least now a correction is just a correction and not the start of a massive wave of panicked selling.

It is time once again to put my ramblings, rants and ruminations for the previous 12 months under the spotlight. Did I correctly spot any stock market or economic trends or should I be standing in the corner with the dunce cap on for most of 2010?

Well September passed rather uneventfully as far as the stock market was concerned although in the last few days, it has pulled back somewhat. However the overall trend is undoubtedly upwards and this looks like it will be maintained for the rest of the year. Despite plenty of gloomy views the bull market lives on, at least for now.

Hover over the stock price change to see the stock price graph or click on the name of the stock or index to see more detailed information on the Yahoo Finance website.

Without doubt the 2008-2009 bear market has been savage and most investors have seen their investment portfolios take a battering.  This year has been particularly unnerving as the Australian stock market looked like it may fall below 3000 just some weeks ago and we were heading for levels not seen since the last bear market.  But just as all bull markets come to an end so do bear markets, and so I cannot help wondering if the rally since the lows of March (Ides of March?) mean we are already in the next bull market phase?

Back in October last year I wrote about the relationship I saw between the QBE stock price and the ASX All Ordinaries Index. At that time I suggested that the relationship had broken down as a result of the chaos caused by the failure of Lehman Brothers in September 2008, so now around 6 months later it seems a good time to have a look again at the relationship between the QBE and All Ordinaries stock price charts.

QBE Insurance Group (ASX.QBE) is an Australian general insurer that over the long term, has been good to investors. However the stock price has not been immune from the recent stock market rout and the share price was clipped from a 52 week high of over $33 in late 2007 to under $20 in March 2008.

For quite some time I have been using the QBE and ASX All Ordinaries (All Ords) charts to give me some idea of what the market mood is like and to try and spot any trends. The reason I use these charts is because the QBE stock price tends to move in sync with the All Ordinaries Index, but with greater volatility. To see what I mean let’s look at the 10 year chart for QBE and the All Ords as shown below. (click on the chart to see a larger version)