Travelling Technicals with Global Indices: Dow Jones Global Titans 50

With the global steadiness of the world economy called into question over the past few weeks it would be fitting to assess the reaction multinational corporations have had to the latest developments that unfolded themselves. In an age where the interconnectedness of nations has formed the mantle piece of globalisation that has yet to be tested, the current situation temper critics reasoning why the implementation of closer relations amongst countries do produce risks that shouldn't be ignored.

So today I will be focusing on the Dow Jones Global Titans 50 Index, a market index that tracks 50 of the world's largest blue chip companies. The companies have a large portfolio of assets that earn profits in their home countries and abroad, helping us to identify global trends easier than what it would be had we only studied each individual stock in isolation.

One of the major themes last year was the strengthening dollar that wrecked havoc with corporations profits abroad when poised to repatriated them causing them to lose a significant portion of the profit due to currency fluctuations.

It seems as if this trend may continue into the future with the embarkment of negative interest rate policies from fellow developed economies but a progressively hawkish US policy. This divergence will drive the dollar further however the momentum that was built on from the expectation of the Fed raising rates has lost steam with Fed chair Janet Yellen signalling that central bank might be pushed into easing back on their expected hiking intervals.

The Top 10 Components of the Dow Jones Global Titans 50:

1. Apple Inc.
2. Microsoft Corp.
3. ExxonMobil Corp.
4. Johnson & Johnson 
5. General Electric Co
6. Facebook Inc. A
7. Berkshire & Hathway B
8. Nestle SA Reg
9. Amazon.com Inc.
10. Procter & Gamble 

Found on S&P Dow Jones Indices McGraw Hill Financials 

It is evident from the list above that US companies dominate the index which isn't surprising however it's the global brand that makes them stand out from the rest (the exclusion of Berkshire & Hathway). Most of the products sold are consumer goods that have recognisable brands that are easily distinguished in countries throughout the world. 

The importance here is that these corporations with this type competitive advantage should generally see a strong correlation with global economic activity which provides a gauge to measure the condition of the world economy. 

Monthly

Probably the only distinct technical pattern that I see is the long term uptrend that recently broke down. Before that the index had gone grinded along resistance provided for by previous highs but lacked the impetus to go further. Price action remained muted until the second half of last year when it made a dive downwards through the upward support confirming the break of the trend. 

From there we've seen rather large ranged candles indicating an uptick in volatility. The price has also touched the 50 SMA a number of times and subsequently bounced but as things stand at present the price lies underneath that mark. Although we still have half the month to go it would be important to watch things closely. 

On the RSI I've highlighted how the indicator briefly tipped below 50 only to surge upwards again but finds itself in a compromising position. This would suggest a weakness in upward momentum and if lateral support were to break down we could see a down move materialise quickly. 

Weekly

Scaling in closer to the weekly and we're able to pinpoint better where the problematic technical areas may be. A basic head and shoulder formation has formed with the price having tested the neckline but able to hold its ground and find itself on the right side of things for the buyers. The price is below both 50 and 200 SMA which gives the sellers the edge up. 

Once again I'm concentrating on the RSI with two rectangular boxes labelled 1 and 2 respectively. The first box shows how the steady uptrend was able to hold onto the all important 50 mark and retested that figure a number of times during the process, but we see in the second box how momentum hasn't been able to find a strong position to work off and continues to slip around. This would explain the choppy action that's been experience and possibly a clue to what we may still see. 

Both moving averages don't have a prominent direction although the 50 SMA is leaning downwards it's not enough to draw a line in the sand. 

That concludes another edition of Travelling Technicals, I hope you've enjoyed it and don't forget to send me your feedback, it's gladly appreciated. If you would like to contact me you can do so by email cadetrader@gmail.com, until next week.