In my previous contribution, ‘Are the celebrations on the American stock exchange ending?’, you read about the phenomenal increase since 2009. In 8 years time, the American index tripled.
During the same period, the EuroStoxx 600 Europe performed below par. The resistance zone of 415 points has been in place for 17 years already1 If Europe’s most prominent stock index breaks through that zone, trend investors will step into the market, internationally.
This clearly shows that the financial crisis of 2009 hit America much harder than it did Europe.
Luckily, as an investor you can choose your market. And the difference with America shows that making the correct choice is of the essence.
Say you have two stock market indexes, each with 500 shares. One index performs at 40%, the other 10%. The index that performs 40% has more risers, and those risers have a bigger percentual increase than the index that rises only 10%.
In other words, you increase your chance of success and your returns.
One can compare stock markets bilaterally the best by using relative strength indexes. The lines starts at 100 and you can clearly see how the distance between the two lines grows. You can also see whether the previous tops on those lines are broken through. For a reliable analysis, you should check the relative strength between stock exchanges every month. The starting point is best situated on the bottom after a global collapse. If there is no recent collapse, you could best take a time frame of 3 or 6 months.
One glance at the graph above will show that Asian markets outperform Belgian ones. You can see that the South-Korean exchange is doing better than the Belgian one, that the South-Korean exchange ignores the North-Korean threat, and that the American technological market Nasdaq is still moving upward.
I have checked off the South-American stock exchanges. They also perform beautifully, but are greatly influenced due to their exchange course.
