Charts review: ASX 200, All Ords, BHP, CBA plus AMEX Gold & Silver
May 24th, 2011 · Greg Atkinson · 29 Comments
An overdue stock market correction is currently working it’s way across global markets and as usual spooked investors have been selling out of the financials and mining stocks in Australia. Once again this illustrates just how feeble the ASX All Ords and ASX 200 are and how dangerously unbalanced the Australian economy is. But is the current correction anything out of the ordinary?
Despite some over-hyped claims made by mainstream financial reporters and many investment related newsletters the current correction is simply just another shift within a trading range that has existed for around two years.
I know that is not exactly exciting news and it won’t sell many newspapers, but if we look at a chart of the S&P/ASX 200 over the last three years you will see that in the overall scheme of things, the current correction is nothing extraordinary.
S&P/ASX 200 Index – 3 year chart
Since late 2009 the ASX 200 has traded basically within a range of around 4400-4800 with the very occasional rally near 5000 and the odd slump below 44oo.
It’s pretty clear that investors are pretty keen to sell if they sense much market risk and are also relatively keen to buy back in when they feel stocks have been oversold.
Now to have a look at how much investor fear is out there let’s have a look at the AMEX Gold & Silver Index vs the ASX 200 in the chart below.
S&P/ASX 200 versus the AMEX Gold & Silver Index
Without getting into too much detail we can see how the AMEX Gold and Silver Index (XAU) rallied strongly after the market bottomed out in early 2009 and has since outperformed the ASX 200.
When I look at this chart I simply think of the XAU (in red) as being an indicator of investor fear, so that the moment it looks like fear is the prevaling emotion and has been for quite a few years.
Now let’s have a look at the ASX All Ordinaries along with the stock charts for BHP Billiton and the Commonwealth Bank.
ASX All Ords Index versus BHP & CBA – 5 years chart
It’s pretty clear that the stocks like BHP and CBA are the ones supporting the All Ordinaries Index and if they turn downwards, then the Australian stock market will fall. In short, don’t expect non-mining or non-banking related stocks to push the Australian stock market higher if the mining and bank stocks come under selling pressure.
Finally let’s have a closer look at what has been happening over the last three months.
S&P/ASX 200 Index 3 month candlestick chart
My reading of the chart above is that we should not be that concerned about the current correction at this stage. As has happened a few times before over the last few years we have seen a rally up near 5000 (and sometimes past 5000) followed by correction back towards 4400.
Remember I am not suggesting anyone buy, hold or sell based on my articles so please do you own research and feel free to jump in and comment on the charts above or what you feel the stock market is doing.Search terms: asx200 10 year chart, ASX last 3 months, bhp 5 year chart, asx 200 in last 3 years, bhp billiton limited all ordinaries index, bhp billiton all ordinary index