What Does It Mean for the Market if MSCI Is Making a Major Top Formation?

MSCI (MSCI) is an acronym for Morgan Stanley Capital International. It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, to institutional investors and hedge funds. Sounds like a great business and its stock was recently touted on a popular financial news show Wednesday morning.

Let's take a look at the charts of MSCI with the idea that it is a front-page and top-of-the-fold story.

In the daily bar chart of MSCI, below, I can see that the shares have struggled above the $555 area. MSCI is testing the 50-day moving average line and is just slightly above the 200-day line.

Trading volume has been more active since late April and that is a concern as it could be more traders voting with their feet. The On-Balance-Volume (OBV) line shows a decline from December and its weakness tells me that sellers of MSCI have been more aggressive than buyers.

The Moving Average Convergence Divergence (MACD) oscillator is only slightly above the zero line and thus not far away from an outright sell signal

In the weekly Japanese candlestick chart of MSCI, below, I see a mixed picture. The shares made an important high in late 2021 and corrected lower into 2022. MSCI has largely traded sideways for nearly two years but the indicators have not generated strong buy signals. The shares are slightly above the 40-week moving average line. The weekly volume histogram shows both an expansion of activity and a contraction.

The weekly OBV line looks like it has stalled and begun to weaken in the past few weeks. The MACD oscillator is weak and barely above the zero line.

In the second Japanese candlestick chart of MSCI, below, I used quarterly price data. Here I can see that prices made a 20-fold advance from 2008 -- a secular advance. In 2021 and the first quarter of 2022 I see a top reversal pattern with two large upper shadows to get your attention.

The trading volume has declined over the past five years and the OBV line has been stalled the past three years. The momentum study shows that upside momentum peaked at the end of 2021.

In this daily Point and Figure chart of MSCI, below, I can see a downside price target in the $502 area.

In this weekly Point and Figure chart of MSCI, below, I used close-only price data and a five-box reversal filter. This projects a potential downside price target in the $248 area.

Bottom-line strategy: A top in the stock of MSCI could mean the great bull market that started in early 2009 is over. If a secular bear market has started then the need for MSCI's services should decline, in my opinion.

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