World Markets Analysis
Aksel Kibar
19 January 2009
MSCI WORLD MARKETS INDEX
Created in MetaStock from Equis International
The chart above is the MSCI World Markets index between 1995 and 2009. We can clearly see that the prices have moved in trends over the past 14 years. Neither media nor financial experts were correct but market action reflected reality. Last but not least, history repeated itself. In 2000, the MSCI World Markets formed an H&S reversal pattern at the top. The weakness was followed by a clear negative divergence on the RSI. After three RSI divergences, the MSCI World Markets index broke down its short/intermediate term support in the last quarter of 2000. After forming an H&S reversal pattern and breaking down the neckline in the second half of 2001, the markets reached a bottom in the second half of 2002. It took another 6 months for the index to recover from these extreme levels. At the bottom in 2003, the RSI generated positive divergences and warned of an approaching strength. The markets reversed sharply in 2003 and started a strong rally. After 5 years of continuous uptrend, the MSCI World Markets gave the first warning signal at the top in 2007. In 2007, the MSCI World Markets reversed with a similar H&S reversal top and the RSI generated a similar negative divergence. After the sharp sell-off in the second half of 2008 the MSCI World Markets Index reached 230 levels. 230-250 range is the lower boundary of the 8 year long sideways movement. The MSCI World Markets index might be forming an intermediate term bottom at these levels. We need to watch the RSI for any positive divergences.
SSEC (CHINA)
Created in MetaStock from Equis International
The chart above is the SSE Composite Index between 2007 and 2009. The index reached its historical high level at 6,124 in October 2007. The first sell signal was generated in January 2008 when the SSEC Index broke down its 2007 lows at 4,800. The downtrend continued in a clear parallel trend channel. The SSE Composite Index reached 1,720 levels in October 2008, only a year after reaching its historical high levels of 6,124. The index rebounded from the low
levels and moved out of the parallel trend channel. In the last two months the SSEC index is consolidating in a range between 2,110 and 1,830. A break above the resistance at 2,110 will generate a buy signal on the moving averages and push the index towards the 2,500-3,000 range. A break below the support at 1,830 will fail the consolidation and base formation and push the index towards the October 2008 lows at 1,720. We are waiting for the SSEC Index to move out of the consolidation range to confirm the next short/intermediate term trend direction.
SENSEX (INDIA)
Created in MetaStock from Equis International
The chart above is the SENSEX index between 1997 and 2009. The index moved in a wide range between 2,700 and 6,230 during 1997-2003 period. In 2004, SENSEX broke above its strong resistance at 6,230 and started accelerating on the upside. In the beginning of 2008, the index reached its historical high at 21,200. The uptrend between 2004 and 2008 formed a clear parallel trend channel. In January 2008, the sharp sell-off in global markets pulled the index to the lower boundary of its long term trend channel. After 5 months of consolidation, SENSEX broke down its long term up trend in June 2008 and continued lower. Breaking down a 4 year long uptrend was the first signal of a trend change. The index broke down the strong intermediate term support at 12,400 in the beginning of October. Breaking down the horizontal support at 12,400 was the second signal of a weakening market and further downside potential. The market sold-off and reached 7,700 in one month. November-December period was a rebound from the extreme lows, during which SENSEX reached 10,000 levels. However, 10,000 was an important intermediate term resistance. The upper boundary of the downward trend channel formed a resistance at 10,000. Important support is at 7,700 and strong resistance is at 10,000. The intermediate/long term downtrend remains intact.
DAX (GERMANY)
Created in MetaStock from Equis International
The chart above is the DAX index between 2003 and 2009. After the bear market of 2000-2003, the DAX index reached 2,300 levels in March 2003. The uptrend that started in the first quarter of 2003, reached 8,000 levels in July 2007. The strong uptrend reversed after the second test of the 8,000 levels in December 2007. The index moved below its 100 period moving average and continued lower by forming a downward trend channel. Every attempt to move higher was
stopped by the 100 period moving average. The index reached 4,300 levels in October 2008. The DAX made higher lows and lower highs (consolidation) after the October 2008 low. The index is now moving in the trend channel and its below the 100 period moving average. The intermediate/long term trend is down. The short/intermediate term trend is moving sideways. We will be watching the upper boundary of the trend channel and the 100 period moving average at 5,000-5,200 range as important resistances.
GOLD ($/OUNCE)
Created in MetaStock from Equis International
Are gold prices in a corrective period? What are the critical levels that will lead to the next trending phase? The chart above shows the clear uptrend in Gold prices between 2000 and 2009. The uptrend is continuing in a clear parallel trend channel. Gold prices are in an uptrend in the long term. In the intermediate term, the prices are in a choppy corrective period. The correction that started in March 2008 from 1,030 levels found support at 680 levels which is the lower boundary of the long term parallel trend channel. The rebound from these levels pushed the Gold prices to the intermediate term trend resistance at 880 levels. We are still in a corrective period in Gold prices. 730-750 range is an important long term support and 850-900 range is an important intermediate/long term resistance. If prices break above the 850-900 range, it will be confirmed with the dual moving average bullish crossover signal.
Aksel Kibar
Assistant Vice President/Portfolio Management
Abu Dhabi Investment Company
www.adic.ae
Disclaimer: Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. Any and all ideas, opinions, forecasts, market analysis or market data, expressed or implied herein, are for informational purposes only and should not be construed as trading recommendations to invest, trade, buy or sell securities and or speculate in any specific futures contract, option or any other market. Any investments, trades, and or speculations made in light of the ideas, opinions, and or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The market data contained herein is believed to be reliable, but has not been independently verified. Accordingly, such data cannot be guaranteed as to reliability, accuracy, or completeness, and as such is subject to change without notice. In no event will ADIC or any of its employees be liable for any information contained herein. Data Source: Reuters, Investopedia.
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