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Australian stock market charts review: market close 2011

December 31st, 2011 · Greg Atkinson · 12 Comments

The Australian stock market has finished trading for the year with the ASX All Ordinaries & S&P & ASX 200 both closing around 15% lower for 2011. It has been a disappointing year for share market investors (yet again) with even the mining stocks stumbling lower over the last 12 months. Many investors might be under the impression that the market slid back over the last few months of 2011, however the Australian stock market has been trending down since as far back as April.

I started this year in a cautious mood however when the All Ords/ASX 200 hit 5000 in the first quarter it looked like I had totally misread the market. Now it’s clear I was not cautious enough and that the crisis in Europe was much more severe than I initially estimated. Foolishly I had thought the Europeans would be able to come together and implement a plan to deal with their debt crisis, but alas that was not to be the case.

Over the last few months investors have also become increasingly concerned about the Chinese economy which is something I have warned about for more than a year as well as warning that commodities prices were set to fall…which they have.

If we have a look at the All Ords & ASX 200 Index charts for 2011 it’s easy now (in hindsight) to see that investors basically lost their appetite for Australian stocks during the year.

ASX All Ordinaries Index 2011 chart

all_ords_1_year_chart_dec_11

What was not apparent back in April was that the Australian stock market had essentially reached its peak for the year and would spend the next 8 months treading downwards.

Back then, the IMF, OECD & G20 were talking about a global economic recovery and so it appeared that the All Ords would push higher – perhaps even close up near 5500.

But as this year progressed a series of events sapped the confidence of Australian stock market investors.  Many started to realise for example that the Chinese economy would be affected by the slowdown in Europe, Japan and the United States.

From July the markets became a lot more volatile and from around that point onwards the Australia market essentially moves sideways with a few big swings up and down as we can see on the candlestick chart of the S&P/ASX 200 Index below.

S&P/ASX 200 Index 2011 chart

asx200_1_year_candlestick_chart_dec_11

Quite clearly the down weeks (shown in red) where more frequent than the up weeks (shown in blue or black). This pattern gradually chipped away at the market from April with the big weekly correction in July basically shifting the trading range a step lower.

The previously resilient mining stocks were not able to support the ASX All Ords/ASX 200 and as commodities prices fell, so did they.

Fortescue , BHP Billiton, Rio Tinto 2011 stock price chart

fmg_bhp_rio_1_year_chart_dec_11

It was only a matter of time before prices for hard commodities such as copper & iron ore fell back despite the bullish howls of mining executives and analysts. My view is that the mining cycle has turned and we are in for some years of lower prices for a range of industrial metals and other hard commodities such as coking coal.

Stocks reliant on consumer spending also fared poorly in 2011 as the charts for  Harvey Norman Holdings (ASX:HVN) and David Jones (ASX:DJS) below illustrate.

Harvey Norman Holdings, David Jones Ltd 2011 stock price chart

hvn_djs_1_year_chart_dec_11

It wasn’t a good year for Australian retailers and the weakness in the domestic economy became more apparent as the year progressed.  The economic woes in Europe also seem to have sapped consumer confidence as the year drew to an end and not even the traditionally strong Christmas shopping season was enough to give the stock prices of Harvey Norman or David Jones a lift.

But there were some stocks that bucked the trend.  Telstra for example has been trending upwards now for quite some time and it seems people still want their pizza, as Domino’s Pizza Enterprises (ASX:DMP) finished the year significantly higher.

Domino’s Pizza Enterprises 2011 stock price chart

dmp_1_year_chart_dec_11

Finally let’s have a look at how the Australian All Ordinaries Index (XAO) has fared against the Dow Jones Industrial Average (DJIA) in the United States.

ASX All Ordinaries Index versus Dow Jones Industrial Average 2011

all_ords_djia_1_year_chart_dec_11

I don’t want to read too much into this chart apart from saying that in terms of points, the Dow Jones has clearly outperformed the All Ords and if commodities prices continue to weaken, then this is likely to be the case next year as well.

Anyway that’s enough for 2011.  I wish readers all the best for the New Year and we can worry about what the market might do in 2012 later!

Greg Atkinson 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


12 responses so far ↓

  • 1 Ned S // Jan 1, 2012 at 1:51 am

    Money is just flowing back to the perceived USD safe haven maybe Greg? 10 year USD T bonds were up 35% for the year or somesuch???

    “… we can worry about what the market might do in 2012 later!”

    And I’m sure we will! 😀 … Happy New Year all.

  • 2 Lachlan // Jan 1, 2012 at 6:00 am

    “And I’m sure we will! ”

    you betcha Ned 😉
    Happy new Year to all the gang.

  • 3 Lachlan // Jan 1, 2012 at 6:07 am

    “Telstra for example has been trending upwards now for quite some time”
    TLS had a great run and hopefully now it will correct a touch.
    Might have to revise upward slightly my buy price on TLS though Greg…after its big run up.

    My big hope for 2012 is that the US will stay out of Iran. If anyone is watching that story you’d know what I’m getting at.

  • 4 Greg Atkinson // Jan 1, 2012 at 9:07 am

    Ned I guess some long term investors are setting themselves up for another U.S. stock market bull run? Extreme optimism perhaps?

  • 5 Stillgotshoeson // Jan 1, 2012 at 12:24 pm

    Greg Atkinson // Jan 1, 2012 at 9:07 am

    Ned I guess some long term investors are setting themselves up for another U.S. stock market bull run? Extreme optimism perhaps?

    Next rally on QEIII that WILL come.

    Ned S // Jan 1, 2012 at 1:51 am
    “… we can worry about what the market might do in 2012 later!”

    And I’m sure we will! 😀 … Happy New Year all.

    Not going to worry, just play the probabilities…… 😉

  • 6 Greg Atkinson // Jan 5, 2012 at 11:07 am

    For now at least it appears that the ASX All Ords/ASX 200 are going to start the year off on a downwards trend as there doesn’t appear to be much New Year’s cheer around.

  • 7 Lachlan // Jan 5, 2012 at 6:32 pm

    I don’t mind at all Greg. It could be of some help getting those TLS shares into a buy range.
    I can’t see either how we can rally just yet from a fundamental view but who knows. And we are still in a good position to plunge to 09 or even new lows if that’s going to be what it takes to get governments and banks easing again. Not that I am promoting such policy.

  • 8 Greg Atkinson // Jan 16, 2012 at 9:28 am

    Lachlan I am still watching TLS shares and for the ASX All Ords/ASX 200 to dip under 4000 once investors accept that Chinese economy won’t stage a miracle turnaround this year and drag the global economy up with it.

  • 9 Lachlan // Jan 16, 2012 at 1:11 pm

    I have seen four of my intermediate bearish metal stocks post bullish reversals in the last week Greg.It may be a sector trend only.

    Anyhow the XJO still grinding sideways. I don’t want to predict it but a downside run will suit me from here as I do not believe too much damage can result, rather just a buying opportunity.

    Over the last few years GFC the major change in my thinking has been to accept that financial powers have much more short-term ability to sway markets than free market purists can ever seem to predict. So the markets are greatly divorced from reality over shorter time frames. I think Europe will have more trouble yet… though USA is fundamentally far worse that may not matter in the near term. China has obvious problems but I think they will keep with the program.
    After the choppy action late last year it would be good now to see a nice capitulation lower and reversal on the XJO but should that eventuate I am more inclined to think solvency in Europe will be a trigger.

  • 10 Lachlan // Jan 16, 2012 at 1:17 pm

    I don’t think easing ever stops but the way it is marketed does. An official announcement to directly spur stocks investment and consumer sentiment. Under the radar QE an indirect measure for addressing insolvency and keeping inflation talk off the air waves.

  • 11 Greg Atkinson // Jan 17, 2012 at 4:48 pm

    Well the market isn’t really doing that much despite the best attempts of the mainstream media to hype things up/down on a daily basis. I think we need that nasty correction you mention Lachlan just to clean things up and set up a base for the next bull market which I hope takes hold before even optimists like me lose hope 🙂

  • 12 Lachlan // Jan 17, 2012 at 7:53 pm

    I’m so optimistic Greg I’m hoping everything will collapse so I can buy more of my favourite things 🙂
    Anyway the futures have just gone crazy to the upside so I’ll have to hope harder. Aussie buck going strong too. TLS trying to go higher again today and ex divi is soon with talk of a special divi but I won’t touch them till they are long term oversold…maybe that’s being fussy but I’ll stick with my own program.
    Hopefully the week will end with a reversal of tonights sentiment.
    I don’t think anyone can tell which way we will break here in the short to medium term but hopefully down before a sharp reversal because long term I see the bull market continuing for sure.

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