XJO and World Markets - Discussion and Charts, page-87

Kates,

The American market and the Australian market are two completely different markets. The latest 30-day correlation between the two is, according to Macroaxis, -0.01. In other words - there is no correlation.

Do not expect any movement in the American market to show up in any significant way in the Australian All Ordinaries Index.

Given these sorts of figures, as I've pointed out in the past, I wonder why we ever talk about the American market.

There are two reasons.

The first is the hegemony over ideas that America has - and thus influences what our media reports. The media is flooded with information from America - so that is what gets reported. And that conditions us to think that what happens in America must be important. In other words - we're brainwashed by the media to think that what happens in America has important effects here.

Well, in the very long term, that is probably true. America is the largest economy in the world - what happens there - if it is macro - will affect us.

Major turning points in the American market will affect our market. But those happen infrequently - the last major turning points were October, 2007 and March, 2009.

We're still waiting for the next one.

I pointed out yesterday, that Industrial Metal Prices in America in the recent past are relatively well correlated with the Australian market. They do seem to have an effect.

But that, as a strong effect, has only been evident for the past year or so. It may or may not continue to work.

You only have to look at my morning report to see that there isn't much connection between commodity prices, particularly Metal Prices (base/iron ore/Gold) and the major American Indices.

Redbacka