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ASX All Ordinaries, ASX 200, ETF Gold & Dow Jones charts for 2010

January 7th, 2011 · Greg Atkinson · 7 Comments

Now that 2010 is behind us, let’s look at some stock market charts for last year and see if we can pick up any trends that might be of some use  as 2011 unfolds. Do the charts reflect a booming Australian economy and set the scene for a bull market in 2011? Or should we be a little more cautious?

Firstly let’s look at the chart for the ASX All Ordinaries Index and see what we can pick up from that.

Australian ASX All Ordinaries Index: Chart for 2010

asx-all-ordinaries-1-year-chart-dec-10

After falling early in the year the ASX All Ords rallied strongly on the back of higher commodities prices and the bullish outlook for the economy espoused by many market experts, officials etc.  But in April global markets were spooked by the economic situation in Europe and the USA; as a result the Australian stock market fell towards 4300 level. (and briefly fell below 4300)

After some mid year instability, the Australian stock market recovered and rallied, but the ASX All Ords still finished the year lower than it started.

Personally I don’t  feel this is the way a stock market would perform during a “booming” economy.   As I have said many times now over the past year, the Australian economy is not booming – people are simply ignoring the warning signs because most commentators seem blinded by the commodities boom.

But not even the commodities boom could lift our market last year and even blue-chip mining stocks like BHP struggled in 2010.

BHP Billiton Stock Chart for 2010

bhp-billiton-1-year-chart-dec-10

Now if you think the chart above looks at lot like the ASX All Ords chart then you are correct. It also shows what a major impact mining related stocks have on the overall Australian stock market since the demise of many financial sector related stocks.

In my view, the commodities sector is not only covering weaknesses in the wider economy, but is also making our stock market look healthier than it is.

Remember, a huge amount of money has been pumped into the G-20 economics over the last few years in order to stimulate the global economy. This drove up demand for commodities and supported commodities prices,  but what is going to happen when this stimulus money starts to fade from view?

Some people believe that demand from China and India will take over and keep  commodities prices high.  I however believe we will see commodities prices come down in 2011 and this won’t be good for the overall Australian stock market.

Next let’s have a look at the movement of oil, gas and gold prices.  To do this I will compare the Exchange Traded Fund GOLD (ETF:GOLD) and the AMEX Oil & Gas Index.  It’s not a perfect combination, but it does help us get the big picture view.

ETF GOLD versus AMEX Oil & Gas Index Chart for 2010

etf-gold-vs-amex-oil-gas-1-year-chart-dec-10

This chart is interesting because it highlights what I have mentioned before in that gold equals panic or fear, and oil prices reflect  global economic demand.

If the global economy is picking up then oil consumption will rise and the oil price will also rise.  As this happens investors will become less fearful and move out of gold and hence gold prices will fall.

Early in 2010 we can see the AMEX Oil & Gas Index rose as the global economy looked to be recovering but then when the economic woes in the US and EU hit the news again, oil and gas prices fell and investors headed into gold.

We don’t need the global economy to boom again before oil prices move upwards and we can see that happening now.  All that needs to happen is that the healing process needs to take root.  At that stage investors will start to move out of gold and that appears to be happening now.

What the chart above also suggests to me is that gold is primed to fall whereas oil prices are primed to rally.  I am probably one of the few gold bears on planet earth, but I reckon my reasoning is fairly sound.

Anyway, 2011 will be the year that I will either be proven correct or made to wear the dunce hat! (again)

Next, let’s have a look at how the Australian stock market has performed versus the U.S stock market by comparing the ASX All Ords to the Dow Jones.

ASX All Ords vs Dow Jones Industrial Average Chart for 2010

all-ords-vs-dow-jones-1-year-chart-dec-10

I don’t want to comment too much on the above chart except to say that it might surprise people to see by how much the Dow Jones  has outperformed the All Ords.

Could it be that investors are backing a U.S recovery whereas they are wary about the outlook for Australia’s economy over the next 12 months?

Finally let’s not forget the big picture view and have a look at the ASX 200 for the last 5 years.

S&P/ASX 200 (XJO) Index 5 Years Chart

sp-asx-200-5-year-chart-dec-10

The 5 year chart of the ASX 200 helps us get things into perspective.  Despite bullish calls by market experts and the occasional upwards rally, the overall trend over the last year or so has been fairly flat and the market has been unable to rally above 5000.

It also helps us see how far below the high of 2007 we are.  It looks likely that even at the end of 2011, we still won’t be near the last bull market high!

Anyway let’s see what 2011 has in store for us!


7 responses so far ↓

  • 1 Greg Atkinson // Jan 12, 2011 at 8:59 am

    By the way, the Baltic Dry Index has been falling since late November 2010 and as of today is still heading down. Since late November the BDI has fallen from 2700 to under 1500. To me, this suggests there is still plenty of weakness out there in the global economy.

    Once again I suggest investors should “Keep an eye on the BDI”!

  • 2 Vince L // Jan 17, 2011 at 2:53 pm

    I guess the floods are not going to help lift the ASX above 5000 anytime soon hey?

  • 3 Brian L // Feb 10, 2011 at 7:31 pm

    G’day Greg

    I had asked about the BDI on another thread, and thanks for your reply/comment.
    I have come across this link and was wondering what your take was on this?

    (trust this link works! Never been good on this stuff!)

    http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=08219AD4-EE99-C99E-CB50924185E62AFC

  • 4 Greg Atkinson // Feb 10, 2011 at 8:16 pm

    Hi Brian,

    Thanks for the link. I will get around to writing something about the BDI soon but in the meantime let me share a few thoughts with you.

    Capacity is taken out of shipping sector pretty quickly. One way to do that is that you simply slow down your fleet, this saves fuel and effectively takes a heap of capacity out of the system.

    Another quick way to get ships out of the system is to simply anchor them somewhere, and a large fleet of ships is already in that state now. (there is often talk about the ghost fleet of S.E Asia)

    As for scrapping. this takes capacity out of the system quickly as well. The ship is not out of service when the last piece of metal is pulled off it, it is out of action the day it sails off to the scrap yard. So I have no idea why the author thinks that the pace of scrapping a ship is in anyway linked to how quickly a ship is taken out of action.

    So I think people who believe the BDI is no longer worth watching probably don’t understand shipping that well.

    Cheers!

  • 5 Carry Trader // Mar 10, 2011 at 1:28 pm

    Hi Greg,

    I just did a quick study on the long term performance of the ASX 200 and compared to the S&P 500 in US and AUD terms. Looks like divergent evidence on which would be the better market to be in.

    Intrinsic Value: ASX 200 and SP 500 Long Term Performance

  • 6 Greg Atkinson // Mar 10, 2011 at 4:08 pm

    Thanks for posting the chart. I personally feel inclined to do as you suggest and top up some overseas positions or stocks with exposure to markets outside Australia. I think we might be seeing the end stages of the mining boom and if I am right, then the AUD and stock market might find the going fairly tough over the next couple of years.

  • 7 Carry Trader // Mar 12, 2011 at 9:17 am

    Ya I know exactly what you mean. The growth story in the Emerging market is facing headwinds with food inflation in the near term, which would lead to medium term problems.

    Have a good one,

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