SP500 Index - 25% To Go To All-Time Peak
The S&P 500 Index yesterday advanced for the 13th time in 15 sessions, reaching a two-year high - a level last seen before the collapse of Lehman Brothers in September 2008. According to the Advisors Sentiment of Investors Intelligence, the percentage bulls increased to 58.8% over the past week - a new high since October 2007 when the number peaked at 62.0%.
A flood of liquidity has propelled the Index to 85.4% above the bear market low of March 9, 2009, meaning another 24.8% increase is required to reach its all-time high of October 2007. The chart below, courtesy of Doug Short, illustrates the up and down movements.
Source: dshort.com, December 21, 2010.
The tables below indicate the 50- and 200-day moving averages for most important global stock markets, with the top table showing mature markets and the bottom one emerging markets. The key numbers to focus on are the columns titled "STDEV from 50 Day" and "STDEV from 200 Day". The figures show how many standard deviations various stock market indices are above the moving averages (red) or below the averages (green).
It is interesting that a number of bourses are very extended relative to their moving averages, including Northern Europe, U.S. large caps, U.S. small caps and a variety of emerging markets (including the MSCI Emerging Markets Index that trades 2.2 standard deviations above its 200-day mean).
At the other end of the spectrum, the markets that have corrected most significantly include over-indebted situations such as Greece, Belgium, Spain, Portugal and Ireland. A few former high-flying emerging markets such as Brazil have also seen significant mean reversion to the key moving averages.
The nascent rally could extend into January, but one should be very cautious here given the overextended condition of some markets, especially against the background of the overbullish sentiment, and run with fairly tight stops.
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Author: Prieur du Plessis
Dr Prieur du Plessis
investmentpostcards.com
With 25 years' experience in investment research and portfolio management, Dr Prieur du Plessis is one of the most experienced and well-known investment professionals in South Africa. More than 1 000 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns. He also published a book, Financial Basics: Investment, in 2002.
He holds the following degrees: BSc (Quantity Surveying) (Cape Town), HonsB (B & A) (cum laude) (Stellenbosch), MBA (cum laude) (Stellenbosch); and DBA (Doctor of Financial Management) (Stellenbosch).
Prieur is chairman of the Plexus group of companies, which he founded in 1995. Previously he was general manager: portfolio management at Sanlam, responsible for the management of investment portfolios with total assets in excess of $5 billion.
Plexus is a pioneer in the mutual fund industry and has achieved a number of firsts under Prieur's leadership. These include the authoritative Plexus Survey, a quarterly analysis of the consistency of the performance of unit trust management companies, the Plexus Offshore Survey, the Plexus Unit Trust Indices, and the PlexCrown Fund Ratings.
Plexus is the South African partner of John Mauldin, American author of the most widely distributed investment newsletter in the world, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental Index™ methodology in the Pan-African area.
In 2001 Prieur received the Santam/AHI Business Leader of the Year award for corporate leadership, business acumen and entrepreneurial flair. He was also profiled in the book South Africa's Leading Managers (2006). Plexus received the AHI/Old Mutual Enterprise of the Year award in 1997 and was also included in the book South Africa's Most Promising Companies (2005).
Prieur is 52 years old and lives with his wife, TV producer and presenter Isabel Verwey, and two children in Welgemoed, Cape Town. His recreational activities include long-distance running, motor cycling and reading. He belongs to the Cape Town Club, Johannesburg Country Club, Gordon's Bay Yacht Club and Swiss Social & Sports Club.
Copyright © 2008-2012 Dr Prieur du Plessis
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