Technical Analysis: MSCI World Index and AC Asia Ex Jap
Last updated: [30/08/2020]
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In this article, I will be zooming into the technical analysis of the MSCI World Index and AC Asia Ex Jap, both of which serve as our benchmark for our investments. An Index ETF that tracks the underlying indexes will be used as a proxy for this exercise.
I'll primarily be examining the market using:
MSCI World Index
Comments & signals for MSCI World Index
Price Actions: For the month of August, prices have broken out of the previous high and is currently still trading within the trend channel itself. This signifies a bullish trend signal signifying that we're still in the midst of the cyclical bull market.
Volume: As compared to volume experience in July, the volume in August had declined slightly, as seen from the world index and S&P 500 index (which forms up a large part of the world index). As of now, there's nothing notable or insightful from the volume action in the month of August.
Klinger Oscillator: Based on the indicator behavior and its current level, two conclusions can be drawn. The first is that price actions since 29 April is inconsistent with the behavior of the indicator itself. The second is that the prices had entered the bullish territory on 26 August. Long story short, by observing the indicator one should be cautious with the current price movements.
Relative Strength Index: Based on the indicator, it is evident that we're currently trading at the over bought territory. From a probabilistic perspective, the chance of a price correction in the near term is quite high.
MSCI AC Asia Ex Jap
Price Actions: Since the start of August, prices had continued its climb up towards the previous high levels back in 2018. Given that the prices are currently still trading within the trend channel (highlighted in blue), from a technical standpoint, we're still in the midst of a cyclical bull market.
Klinger Oscillator: Based on the indicator behavior and its current level, two conclusions can be drawn. The first is that price actions since 12 May is inconsistent with the behavior of the indicator itself. The second is that the prices had since been threading in the bearish territory since 10 July.
Long story short, by observing the indicator one should be cautious with the current price movements.
Relative Strength Index: Based on the indicator, we've yet reached an overbought region. However, there is a slight divergence in the indicator as the higher high in price actions upwards are not supported by a higher high in RSI.
My current views for the month of August is identical to my previous view back in July.
It seems like the market still has the intention to bring prices further up, regardless of the actual fundamental outlook of the global economy. However, while the market =/= the economy, I think it is foolish for one to ignore the fundamentals of the economy. The reason for saying this is because, depending on how the main street performs, that sentiment may very well have a large influence on wall street itself.
Moving forward, the key is to have a better understanding of the sustainability of price actions and adopt proper risk management. Depending on your view of the market, you may want to consider cutting back on your exposure to certain markets and re-enter upon clearer signals of a SUSTAINABLE economic and market recovery.
Remember, a 50% loss requires a 100% return to break even, while time in the market is important, sitting back and doing nothing despite clear signals of an overheated market instead of managing your portfolio to reflect a more appropriate risk exposure for your own financial situation is not the right way moving forward.
Clearly, not making a profit beats incurring a loss. When in doubt, remember the first rule of investing: Never lose money.
Do consume the insights at your own risk and develop your own decision based on both fundamental and technical analysis rather than relying on single metrics for measurement.
Should you need any help or second opinion on your financial and investment planning, feel free to contact me directly at 9234 7537 or drop me an inquiry here.
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Daniel is a Licensed Financial Consultant with MAS, who specializes in retirement and investment planning. Find out more here.
The goal of understanding market timing is not to buy at the market bottom and sell at the market top but instead to identify major changes in a trend and differentiate them from day to day movements in the market.
With the ability to identify these key turning points, investor should be able to avoid a “roller coster to nowhere” of constantly riding the bull markets higher and bear markets lower, ending up with very little to show for the rider in terms of increasing portfolio value.
This article is meant to be the opinion of the author and is for information purposes only.
This article should not be seen as financial advice
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