Technical Analysis: MSCI World Index and AC Asia Ex Jap
Updated: Feb 5
Last updated: [03/02/2021]
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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: Prices reached a new high in the mid of January but had since corrected in the latter half of January. Prices had broken past the trend support channel and are attempting to test the trend channel once more. Depending on the performance in February, a new trend or momentum may be set in place.
Volume: On 29 January, we've seen a huge spike in volume despite minimal price actions. From the candle itself, it appears that sellers are trying to push prices down while price levels are supported by a high volume of buyers.
Klinger Oscillator: The short-term uptrend in both December and January were supported by an upward behavior of the indicator itself, signifying that the uptrend was one that is supported by proper momentum.
However, since January, the indicator had been trading sideways, constantly intersecting between the bullish and bearish indicator. Along with the price movement, this suggests to me that the market is unsure of whether they should take the price to newer highs.
Relative Strength Index: Interestingly, in the last week of January, the RSI corrected itself significantly without major price correction. This is a good indication that the market may be ready to bring the prices to newer heights as the market has cooled down since then despite minimal price decline.
MSCI AC Asia Ex Jap
Price Actions: Unlike the global markets, the Asia market had performed tremendously well in the month of January followed by a correction nearing the end of January. Prices are still trading within the trend channel which signifies the continuation of the uptrend.
Klinger Oscillator: Interestingly, the Klingler oscillator is exhibiting a convergent behavior which signifies that the momentum is declining as time passes and also the fact that the market will be picking a side soon.
It can either break up and remain in the bullish territory or it can break down and remain in the bearish territory. Either way, things should be clearer when we're reaching near the convergence point.
Relative Strength Index: Similarly to the global equities, the RSI had come down significantly from an overbought region. However, unlike the global equities, the prices had come down a fair bit as well (around 7%).
Moving forward, the market is now positioned to continue its uptrend now that things have cooled down a bit in the last week of January.
Volatility Index (for S&P)
Ever since the election had "ended", the volatility index experienced a huge decline and is currently trading near the low 20s. This is a good sign as figures below 20 signify a low volatility environment while figures above 20 signify a highly volatile market.
While the VIX has crossed the 30s region in the last week of January, it had since come down to the normal levels. I reckon that the sudden spike may be due to the ongoing drama that is happening with GameStop.
Looking at the current developments in the market as well as the euphoric attitude of market participants, there is a good to fair chance that we may see a positive year in 2021.
Furthermore given the amount of liquidity available in the market and the lack of alternatives for savers to earn a higher return, all the money is and will continue to flow into the capital markets, therefore pushing prices further up.
In my opinion, unless there is significant news or developments that could change the current market sentiment of investors, it is unlikely that the trend will be disrupted. Though as I've been preaching since last year, whether or not the move is one that is sustainable fundamentally is another question that is to be answered.
Read Also: 2020 Annual Review. 2021 Market Expectations
While our focus remains unchanged in the long term - capturing Asia Region's growth in the next 10 to 20 years - It is also important to acknowledge that valuations matter and not get carried away by the plausible continuation of a bull market in the coming months.
As the saying goes: "the market can stay irrational longer than you can stay solvent", 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, prices go up like an escalator and comes down like an elevator. A 50% loss requires a 100% return to break even, while time in the market is important, sitting back and doing nothing despite signals of an overheated market instead of managing your portfolio's risk exposure is definitely 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.
For my clients, I'll keep yall updated as to how we should position ourselves both so as to capitalize on the short term volatility while remaining focused on our long term investment objective!
If you have any question for me do drop me a text :)
For the rest of my readers, 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 a second opinion on your financial and investment planning, you can get in touch with me and we’ll work something out do together:
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Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides advice in the following areas:
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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, investors should be able to avoid a “roller-coaster 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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