What MSCI Says About November
Mike Macdonald | Oct 30, 2014 11:00AM ET
There is a lot of interest in the equity markets, as global indices bounce sharply higher following the (anticipated) September-October sell-off.
While the short-term indicators are turning positive, suggesting further gains in the coming weeks, monthly studies are turning lower and unwinding overbought areas. Coupled with negative divergence on both the RSI and Stochastics, investors are advised to exercise caution, as price action could turn more volatile in ‘push-pull’ dynamics.
The current rally is likely to settle into consolidation into early November, as the MSCI World Index approaches strong resistance up to congestion around 60.00. (There is scope for a push above here, but the 61.30/35 range highs are expected to provide a strong barrier.)
Following consolidation, falling monthly studies anticipate fresh downside risks, with investor sentiment to deteriorate into the end of the year.
Confirmation of a significant fall will be if the 54.55, current low of October is broken, This will then open up channel support from October 2011, ahead of lows down to the 52.00, (38.2%) retracement of the 2011-2014 rally.
If prices can decisively clear the 61.30/35 range highs, a fresh bull cycle will be confirmed, and investors can adopt an aggressive overweight stance to equities.
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