The MSCI World is a stock market index of 1500 "world" stocks. It is maintained by MSCI Inc., formerly Morgan Stanley Capital International and is often used as a common benchmark for world or global stock funds. The index includes a collection of stocks of all the developed markets in the world. The index includes securities from 23 countries but excludes stocks from emerging economies making it less worldwide unlike the name suggests. The countries included in the index are as follows: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom, and United States.

The chart above analyzes the MSCI World Market Index in the past decade. In 2000, the index generated negative divergences at the top which was followed by a bearish moving average crossover in the last quarter of 2000. The bearish crossover on the long term moving averages signaled a cyclical bear market. In 2002, the index generated positive divergences at the bottom which was followed by a bullish moving average crossover in the second half of 2003. The bullish crossover on the long term moving averages signaled a cyclical bull market. In 2007, the index generated negative divergences at the top which was followed by a bearish moving average crossover in the beginning of 2008. The bearish crossover on the long term moving averages signaled a cyclical bear market. In the beginning of 2009, the index generated positive divergence at the bottom however the divergence is not followed by the long term moving average crossover yet. As a result we still haven't received the confirmation for the cyclical bull market for the world equities. The index moved above its 100 period moving average and found resistance at the 200 period moving average. Following weeks will be very important for the equity markets.

MSCI ARABIAN MARKETS vs. MSCI WORLD MARKETS

MSCI Arabian Markets Index is created by Morgan Stanley Capital International (MSCI). It is designed to measure equity market performance in Arabian Markets. It consists of indices in 11 Arabian countries, 6 from GCC region and 5 from Middle East and North Africa. Overall the MSCI Arabian Markets is a good measurement of equity market performance in Middle East and North Africa. The countries from GCC region are: Kuwait, Bahrain, Oman, Qatar, UAE and Saudi Arabia. The countries from Middle East and North Africa are: Morocco, Jordan, Egypt, Tunisia and Lebanon.

The chart above shows the relative performance between the MSCI Arabian Markets and the MSCI World Markets for the past three years. ADIC's TECH TALK analyzed the relative performance chart in the previous issues and drew attention to the improving technical outlook for the MENA region versus the World Markets. TECH TALK analyzed the cyclical behavior of the relative performance in the last three years. Every cycle on the relative performance lasted 12 months. In the beginning of 2009 the MSCI Arabian Markets/MSCI World Markets ratio found support at the 2007 low levels. The first rebound reached the moving average at 1.65 levels and the ratio pulled back towards 1.45 levels. The latest report on the 15th of April said: "In the last two weeks, the relative performance reversed to test the moving average at 1.6 levels. A break above the moving average will be considered bullish for the MENA relative performance versus the World Markets. We are now very close to the important technical level." After consolidating below the moving average for another two weeks, the relative performance chart penetrated above the moving average at 1.60 levels. The outperformance for the MENA region versus the World Markets continues. The recent technical signal is bullish for the MSCI Arabian Markets.

10 YEAR U.S. TREASURY NOTE

Treasury securities are the debt financing instruments of the United States Federal government, and they are often referred to simply as Treasuries. There are four types of marketable treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS). Treasury notes mature in two to ten years. The 10- year Treasury note has become the security most frequently quoted when discussing the performance of the U.S. government-bond market and is used to convey the market's take on longer-term macroeconomic expectations.

The chart above is the historical prices of the 10 Year U.S. Treasury note between 1985 and 2008. ADIC's TECH TALK analyzed the 10 Year U.S. Treasuries in December 2008 while the price was reaching the 130 levels. The report drew attention to the long term uptrend in treasuries and analyzed the chart with the basic tools, support & resistance. The TECH TALK said: "The 10 Year U.S. Treasury Note's cyclical behavior in the parallel trend channel resulted in several tests of the upper boundary (resistance) and the lower boundary (support). In 2007, the 10 Year Note rebounded from the support level around 105 levels and rallied towards 125-130 range. 125-130 range is the upper boundary of the parallel trend channel. We are now very close to an important resistance in the 10 Year U.S. Treasury Notes." The U.S. Treasuries found resistance at 128 levels in December and declined towards 120 levels in the last 5 months. If we analyze the previous cyclical short/intermediate term trends we can see that every intermediate term uptrend was eventually followed by an intermediate term counter trend move. However, the magnitude of each counter trend move was different. In 1987, 1994 and 2000 the corrections were sharp and fast, retracing the previous intermediate term up trends in a shorter time period. The correction in 2004 was a sideways movement with a slight downward slope and it took more time to retrace the previous intermediate term uptrend. We know that the 10 Year U.S. Treasuries found resistance at 128 levels and the short term trend is downwards. However, we still need to see the previous uptrend to reverse. The lower boundary (support) of the uptrend is at 118-120 range.

10 YEAR U.S. TREASURY YIELDS

The chart above analyzes the 10 year U.S. Treasury Note yields between 1993 and 2009. Since the beginning of 2009, the yields have rebounded from the lows and reached the previously broken support/resistance level at 3.3. The sharp rebound found resistance at 3.3 levels. The yields have strong resistances ahead. We might see a consolidation below the 3.3 levels for a while. The yields are now at 3.1 levels.

Aksel Kibar
Assistant Vice President/Portfolio Management
Abu Dhabi Investment Company
www.adic.ae

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