A tour around the World: S&P/ASX200

Is the S&P/ASX200 a canary in the coal mine?

A tour around the world

Often major indices around the world trade in similar directions and often synchronize on a trough. Sometimes some indices are ahead of the ‘game’ and have an early change in trend compared to other world indices. A reason for me to follow the leading indices around the world.

Australia is a country rich of natural resources such as iron ore, natural gas, gold, silver, nickel, minerals such as cobalt etc. All needed to support our increasing energy demands and support the development of new technologies.

So, I started to follow the leading index of Australia the S&P/ASX200 and many other indices from around the world sometime ago. If we are going into a recession most likely this will effect many indices around the world and certainly the Australian ASX200 index. Today I will revisit the ASX200.

S&P/ASX200 revisited

Back in April 2021 I posted an analysis on the S&P/ASX200, the Australian leading Stock Market Index on my Twitter account. You can read it here.

I have updated the data on the monthly chart you find below, but not the analysis as annotated on the chart in April.

In my tweet from April I noted that the price and time from 2007 high to 2020 low and from the 2009 low to the recent high in August 2021 was expected to be in reverse in price and time.

Indeed, so far it seems the case that the index since February 2015 has been mirroring past market behaviour in a similar (reverse) fashion. I do not know if the mirroring will keep repeating, but certainly it is a possible sign for an important inflection point or change in trend.

Is the ASX200 a canary in the coal mine?

Since the low of 2020 the ASX200 followed most indices around the world until to recent top in August 2021. Lately the index has not made higher highs anymore compared to other indices.

This which makes me think is the ASX200 a canary in the coal mine? Is this the first signal we are close to a top in many other stock markets around the world? We will have to watch the chart in front of us. A top could take several months to form.

Conclusion

With the commodities cycles probably to boom in the next decades Australia’s economy may be well positioned for years for Australia to prosper as a country.

When major economies like China and many others countries around the world in need for commodities to sustain their further economic growth will rollover into a recession the Australian economy and companies thriving on these commodities will certainly be affected (first).

For me a reason to keep a close watch on the ASX200 and see if we have made a change in trend already for other indices to follow after sometime.

Disclosure: No positions in this index at the time of writing. Read our full disclaimer.