The week started on a dismal note for global stock markets with the MSCI World Index and the MSCI Emerging Markets Index down by 2.7% and 1.9% respectively.
The declines were not unexpected as fundamental and technical measures have indicated that the spring rally was exhausting itself. My recent posts “Stock markets: retreat in store?” and “Have stock markets run away from reality?” argued the case for a retreat / consolidation.
Risk aversion moved to center stage as investors weighed the prospects of a global economic recovery. Adding to the woes was a report by the World Bank that the global recession would be deeper than it had predicted in March. According to Bloomberg, the Bank said the world economy would contract by 2.9% compared with a previous forecast of a 1.7% decline. Growth would be 2% next year, down from a 2.3% prediction.
The S&P 500 Index (893) declined by 3.3%, taking the Index into negative territory for the year to date and to six points below its 50-day moving average and eight points below its 200-day line. Should these breaks hold over the next few days, it would serve as confirmation that stocks have entered a downside correction. But true to form with Mr Market, nothing is cut and dried: the 50-day average looks set to break upwards through the 200-day average, i.e. a so-called “golden cross” – usually a positive for the market.
Source: StockCharts.com
Enough said. This is where I am going to rely on your collective wisdom and ask you to express your opinion on the direction of the stock market. We will consider two forecast periods and focus specifically on whether the S&P 500 Index will be up or down from its current level (893) by (1) September 30, 2009 and (2) December 31, 2009 respectively.
All you need to do is think about this for a while or “throw the bones”, and provide your answers by clicking on the appropriate button on each of the two poll images below.
The poll will run until 22:00 EST on Friday, June 26, 2008, whereafter the results will be reported on the blog.
