Saturday, May 17, 2014

Two way markets, Jim Rogers and comparisons with 1987

The markets continue to be all over the place. The headline indices continue to remain close to new highs, yet under the surface the broader indices are showing a different position.

Below is the FTSE100, the headline index in the UK, the mid-cap FTSE250 and the AIM All-Share. As you can see, the differences are striking.

Here we have the comparison between the Dow and the Russell 2000. Again, there is a clear difference in the market action on recent weeks.

I was still at school in 1987, and can't recall even knowing of the stock market or of trading until I saw something on the TV about the October crash. Consider the words of Jim Rogers about that period:

"If you check, you will see that, during 1987, while the S&P and the Dow were going up, the rest of the market was quietly eroding away. In December 1986, I shorted the financial stocks, and throughout 1987, I didn't lose any money, even though the Dow and the S&P were going through the roof." - Jim Rogers, from his Market Wizards interview.

Now, I am not for a moment suggesting that we have an impending crash on our hands. But there appears to be the potential for a similar split occurring in what the headline indices are doing, and what the rest of the market is doing.

1 comment:

  1. Glad that you made this comparison between indices. I keep track of the Dow Industrials, as well as the Russell 2000 and Wilshire 5000. Simply put, the Dow Industrials is 30 stocks and the other two say more about the market in general. Just my opinion.