The FINANCIAL — The news out of Eur-ope continues to worsen, amplifying concerns about risk to the financial system and economic growth.
Global financial markets, many of which have rallied over the past month or so, are beginning to show signs of turning back down. On both a relative and absolute basis, the UAE markets have remained weak, and are therefore prone to be negatively impacted by accelerated selling in global markets.Last week, the Dubai Financial Market General Index fell by 3.67 or 0.27 per cent to close at 1,379.05. Volume was lethargic reaching its lowest level of the past several years, other than shortened trading weeks. Market breadth mimicked the low interest reflected in volume, with 11 advancing listings versus 15 declining.
Given the current pattern of the price chart and recent price action, the assumption is that the six-and-a-half month downtrend will continue until proven otherwise. If the DFMGI can move higher from current levels, and subsequently close above 1,426.28, higher prices are possible, at least in the short-term.
The next area above there to watch for resistance is around 1,456. If the index can then get above that level watch for a rise toward the 200 exponential daily moving average, currently around 1,500. Regardless, the DFMGI remains in a long-term bearish posture until it closes above 1,691.64.The DFMGI is in a downtrend in the short, medium, and long-term, as the index hovers just three per cent above the low of the year at 1,338.56. This is a precarious position which puts the index at risk of breaking below the low of the year at some point — a continuation of the long-term bearish trend.
Short-term weakness is indicated on a move below 1,374.47, with further weakness on trade below 1,363. As each level is broken the probability that the DFMGI will approach the low of the year increases, and therefore also the possibility it could break below that low. That would be a bearish signal that could see the index continue to fall from there.
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