Wine Investment, News, Bordeaux, Liv-Ex
Which way are the trading winds blowing?
In September, the Liv-ex Fine Wine 100, the industry benchmark, showed relative stability despite continued selling pressure in the broader market. The index declined by 0.1% month-on-month to close at 376.34. The Liv-ex Fine Wine 50 (which tracks the movement of First Growths) also fell by 0.1% (NB: this index is updated daily). The last two monthly declines have been notably milder than previous months.
However, looking at the broader fine wine market, the Liv-ex Fine Wine 1000 fell by 1.0%, slightly more than the 0.8% fall recorded last month. Year-to-date, the index has fallen by 10.4%.
Last month, we wrote that August’s figures pointed towards a buyers’ market. It appears buyers have indeed stepped up to the mark, witnessed by increased trading activity by both value and volume in September. Market breadth continued to expand steadily, with 2,202 individual labels (LWIN 11s) trading over the month, an 8.2% increase on August.
Whether the milder declines in the Liv-ex Fine Wine 100 and Liv-ex Fine Wine 50 are a sign of cautious optimism returning to the market or simply a ‘back to school’ moment, it is difficult to say, but the Liv-ex Fine Wine 1000’s decline suggests we’re not out of the woods yet.
Chart of the Month
It’s ‘decision time’ for the Fine Wine Investables
The price of the Liv-ex Fine Wine Investables has followed a rising trend since its inception. It is supported by an ascending long-term primary trendline (in red on the chart below) that remains intact at the end of September 2023.
The price action of the Investables has been relatively choppy compared to other Liv-ex Indices; for example, the price dropped 40% between 2011 and 2014. The index’s volatility is even more pronounced in the Relative Strength Index (RSI), an indicator used to measure the speed and depth of an index’s price movement, charted in black below.
The Fine Wine Investables’ Relative Strength Index
The RSI has fluctuated from extreme overbought territory (over the ‘70 line’) to extreme oversold (below the ‘30 line’) territory numerous times. While the RSI is now in oversold territory, which can be interpreted as a buy signal, it has not yet broken the lows it previously achieved.
Since its all-time high at 415, the index price has been steadily falling and now finds itself in a significant convergence zone, which could offer support or see the price drop lower. Not only is the price re-testing its primary trendline at a level close to the 2011 highs, but it is also supported by the Simple Moving Average 50-months (SMA50), a long-term moving average which can be used to assess whether an index will continue on its current trend or reverse it.
Now is a critical time in the index’s evolution. If the price bounces off this major convergence zone, the reaction against the 7-month SMA will need to be monitored; this short-term moving average might indicate whether the rebound will last in the long-term. The next potential support for the index would be at 349 (its 2018 high point), just below the 38.2% Fibonacci retracement, the dotted green line on Chart 1 indicating support or resistance levels.