I've just been doing a comparison between the movement in the ASX200 and the Dow over the last week or so, and some sector comparisons locally. The ASX200 exhibited a relatively robust increase in the last week while the Dow showed definite weakness.
The following 2 IGM daily charts show the comparison:
At first glance this divergence in movement in an overall sense can probably be put down to the "healthy" (i.e. "better than bad") company reporting locally in the last couple of weeks, and the index has benefited as a result, whereas of course the Dow is suffering a bit from a combination of the morning after post reporting hangover, summer holidays, and after-thoughts about how their economy's really going.
However if you look at some of the local sector charts, most are showing continual strength, exemplified by the banks, while only materials and utilities are looking flat.
This suggests to me a couple of possibilities:
1. If the global market does correct itself, our market could fall harder than anyone else to "catch up" (or catch down I suppose). This could provide a good shorting opp using overseas markets as a lead indicator if ours holds up for a little longer than the rest.
2. Our market may not retrace as much as others due to the comparative strength/resilience of our economy, so any dip could be a good buying opp for quality stocks.
3. There could be some sector divergence as materials mostly but perhaps also energy see significant drops taking a lead from China in particular which is showing an increase in volatility and an already 20% drop from its most recent high. While other sectors (financials in particular, but maybe also consumer, health) may continue to show some strength, having lagged the recovery in materials that has occurred earlier in the post March rally.
4. If scenario 3 is true, then instead of scenario 1, then the local market overall may not retrace all that much, supported by the stronger sectors. How much that happens will of course depend on how much the big miners fall if they do, as they can affect the index quite strongly.
A key imo will be to watch for divergence between the local sectors from here as to which way the local market will go.
(20min delay)