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ASX All Ordinaries Index – review of 5, 10 and 25 year charts

October 17th, 2012 · Greg Atkinson · 2 Comments

The Australian stock market closed up again today with the ASX All Ordinaries Index finishing at 4550.90 points – a rise of 0.82% for the day.  The last couple of months have been generally kind to Australian stocks but we need to keep this recent stock market movement in perspective.

The reality is that the ASX All Ords closed today lower than it did at the end of 2009 which supports the view I have written about several times over the last few years which is that the market is basically direction-less.

If we look at the five year chart of the All Ords (XJO) below we can see how little has happened since the rally off the GFC low in early 2009.

ASX All Ordinaries Index 5 year chart

all_ords_5_year_candlestick_chart_oct_2012

The first low I have marked in red is where the market finally bottomed-out after the GFC crash and failure of Lehman Brothers.  I have then marked the tops since then which are all around the 500o points level and the significant lows which have not been much below 4000 points so far.

So basically for the last three years the Australian stock market has moved within approximately a 1000 point range and never really looked like heading towards the high of 2007 or the low of 2009 again.  But there has been some livelier shorter term movements which I imagine have kept the day traders and technical analysts busy.

If we now look at the 10 year chart of the All Ords we can see quite clearly how far away the last bull market high is.

ASX All Ordinaries Index 10 year chart

all_ords_10_year_chart_oct_2012

This chart helps put the recent move upwards into perspective. Even if the current mini-rally was to push the All Ords up to 5000 the market would still be around the same level as late 2009.

At the moment the market is trading around 2005 levels and I have marked this  level with black line on the chart. The green line shows the level of the 2007 high.

While we are looking at the last decade let’s quickly review the charts of two widely held stocks – Commonwealth Bank  and BHP Billiton to see how they have fared.

ASX All Ords versus Commonwealth Bank and BHP Billiton

all_ords_vs_bhp_cba_oct_2012

Even despite falling since early 2011, BHP shares have outperformed the ASX All Ords and shares in CBA by quite a wide margin. I guess this is hardly a surprise, but I must admit when I looked at this chart I was somewhat amazed by the performance gap between BHP and CBA shares.

Another interesting comparison to look at is the Australian All Ords Index versus the U.S. S&P 500 Index

 ASX All Ords Index versus S&P 500 Index 10 year chart

all_ords_vs_sp500_10_year_chart_oct_2012

The Australian All Ords Index has outperformed the U.S. S&P 500 for most of the last decade largely due to the resources boom. But as this boom faded and the U.S. Federal Reserve continued with their Quantitative Easing (QE), the S&P has over the last year or so crept ahead of the All Ords.  I suspect the S&P 500 will continue to outperform the All Ords for the next few years at least.

Finally let’s review what the Australian stock market has done since 1988.

ASX All Ordinaries Index Chart – 1988 to 2012

all_ords_index_chart_1988_2012

This is a very interesting chart because it shows that effectively what has happened is that the Australian share market has reverted back to the long term trend which is the blue line.

The stock market run up from around 2003 (highlighted by the red line)  in hindsight looks very much like an asset bubble.  But at the time commodities prices were soaring, unemployment levels were low and the outlook for stocks appeared very good.  Most experienced investors knew a correction would roll along sometime but few of us expected it would be quite and bad (and long) as it turned out to be.

The green line simply shows a roughly marked trend line for the period 2003 to now with the ‘bubble’ phase removed.  Interestingly this trend  is  not that different from the long term 25 year trend (blue line) which gives me some confidence that the market might be able to build some upward momentum in 2013.

This article was written by Greg Atkinson who is the editor of Shareswatch Australia and the Managing Director of Ohori Capital. He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp


2 responses so far ↓

  • 1 Greg Atkinson // Oct 24, 2012 at 8:44 am

    Looks like the market is following European & U.S. markets down today. Looks like the All Ords is going to have a tough time rallying much past 4500 for perhaps the rest of this year?

  • 2 Manfred // Oct 23, 2015 at 3:44 pm

    Some good comparisons and historical references.

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