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Reuters
Sunday,
May 11, 2008 14:32 IST (This comment is written at the above time
and uploaded to the site before 1000 IST whenever possible) |
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A good downtrend
since last Monday’s close with the market closing at pretty much the low for
the week. This
downturn was confirmed early in the week with the Parabolic-SAR touching the
price action and the MACD fast line turning down towards a cross. The 200-day
Moving Average has been both support and resistance and will continue to be a
significant level. What
we’ve seen this week looks very much like the beginnings of the reaction low
I was talking about – see earlier comment below. The
recovery from the Q1 low has so far been very similar to what we saw after
the sell-off in 2006 with a slight overshoot to the downside below the longer
trend. We are now back above our long term trendline and current end-year
forecasts of around 19,000 look reasonable as you can see from the lower
chart. One thing to watch for is a minor downward correction to the recent
upturn to form a ‘reaction low.’ Have a close look at the 2006 downturn and
you will see what I mean. From a technical point of view don’t be surprised
to see the BSE correct back towards the long term trendline for a short time.
(As referred to above this is likely happening now) All
that has really happened is that the BSE has corrected from the extremely
overbought levels seen late last year. Since last November the chart had been
pointing to a correction such as the one we have seen, as regular readers of
this item will know. (Please note the 200-day on this weekly
chart is calculated week-to-day so the absolute level of the line does not
exactly coincide with the value on the daily chart – for our purposes it is
close enough) (Parabolic
SAR (Stop and Reverse) study gives signals for going long or short. While the
study, the dots, is below the price action it indicates a long position but
as the trend slackens the study touches the price action and indicates a
switch to a short. It is supposed to be a constant position trading system.) Below
is a picture of the BSE valuation vis-à-vis the main Asian markets since the
start of the year and since the longer-term upmove started in May 2005. As
you can see the BSE is underperforming its Asian counterparts so far this
year but measured since May 2005 it is still outperforming. |
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The chart
immediately above shows the Relative Performance (RP) of the BSE vs the benchmark MSCI Asia Pacific Stocks Index ex-Japan.
I’ve set the RP zero to the start at May 1, 2005 when the The MSCI AC (All
Country) Far East ex Japan Index is a free float-adjusted market
capitalization index that is designed to measure equity market performance in
the Far East, excluding |
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Click here for a
technical look at Pakistan stocks |
Reuters
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