12th July 2010 went down into the history books of the footballing world. Spain was the newly crowned the world champions and have never won a World Cup title before. Even though I’m a staunch supporter of Netherlands, I have to congratulate Spain for playing better football that night. The final was scrappy and it was one of the most boring finals I’ve seen actually. It didn’t help that the final was played at 2.30am and that the match went into extra time. So, when the world was glued to the World Cup, how did the stock market fare? Did the World Cup syndrome pattern hold up?
In the first post on World Cup syndrome, it was posted that “In five out of the seven tournaments since 1982, the STI started to consolidate one to two months before the event. The STI typically reached a high in the April to May period, falling an average of 11.4 per cent by the end of the World Cup.” On 11th June (star of WC), STI closed at 2796. On 12th July (end of WC), STI closed at 2925. STI was up 4.6% ever since the start of the tournament. It was obviously positive during the World Cup period. Even though before the start of the WC, STI dropped 12.2% from the peak on 15th April 2010 (as reported in World Cup Syndrome – Review 1) and the pattern held true for that period, after the end of WC, the pattern didn’t hold true as seen above. Having said that, STI is still 3% away from the peak.
The volume during the WC was quite low as seen from the volume bars in the technical chart below. I think the pattern didn’t hold true during the actual WC period as the valuations were already very low after falling quite significantly and the Europe debt crisis was off the minds of investors for a while. Maybe, the market has priced in the fears of the debt crisis too much and maybe the debt problem wasn’t as bad as many thought it would be.