If you are a stock player, you must hear about the stock index (world) every day. Why do economic news every day announce that the Dow Jones index closed higher/lower today? What effect will it have on the JCI, for Indonesia? Do the Dow Index's rise and fall also affect your trading decisions? Also read: World Stock Indices Collection.
In the mass media, the most frequently reported world stock indexes (up and down) are the American indices, especially the Dow Jones Index, SP500, and Nasdaq. Then what is the effect on the Indonesian Stock Exchange (IHSG)?
When the Dow Index rises on the previous day, the JCI will tend to strengthen in trading the next day. On the other hand, when the Dow Index closes down, the JCI will tend to follow the decline in the Dow the next day. Why is that? Because America is the country with the strongest economy, its stock exchange is usually the reference for world stock exchanges, not only in Indonesia.
In general, when the JCI follows the movement of the Dow Jones, this is more because of the "talkative" nature of market players, because if the Dow Jones Index falls, for example, then there must be something wrong with America (which is one of the world's economic centers).
So, in the end, this can also have an impact on Indonesia. In the end, the decline in the Dow Jones will be followed by the JCI.
Notice, the key word here is inclined. This means that when the Dow Index rises, the JCI DOES NOT ALWAYS go up, and vice versa.
There is one thing you need to pay attention to. JCI may also tend to follow the movement of Asian stock markets. For example: SSE closed higher because analysts predict that the panda country's economic growth will improve. So, the JCI will usually strengthen. When Asian stock indexes strengthen, the JCI usually tends to also strengthen.
Should the rise and fall of overseas stock indices have an effect on your trading decisions?
Of course not. The driving force behind the JCI is none other than the stocks themselves. So what you should analyze more deeply is not the JCI, but the stock. Each stock has its own technical movement pattern. Not always when the JCI goes down, all stocks will go down, and vice versa when the JCI is strong bullish, there are still stocks that are correcting. So, don't misinterpret: If the JCI goes down, it means don't trade. It is not like that.
Well you know. So what is the use of knowing the position of the JCI and foreign indexes against the JCI?
In my opinion, we only need to know to see the index position. Another reason might be that if Asian stock markets, especially China's, are suddenly hit by a slumping economic report card, which could drop the SSE quite deep (as in 2015), then it is very likely (almost certain) that the JCI will also fall. So, if the JCI is in free fall, then yes you have to get out of the market, don't be in a rush to trade if you see stocks that have gone down, it's still falling again.
