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Reuters
Friday,
May 16, 2008 17:51 IST (This comment is written at the above time
and uploaded to the site before 1000 IST whenever possible) |
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A
pretty much sideways move with the 200-day Moving Average providing overhead
resistance. The short-term bearish
signals are turning and this looks like the end of what has been a short
reaction low. The Parabolic-SAR has touched the price action which under the
rules of the study signals a switch to a long position. The P-SAR has worked
very well in the market of late as you can see. The
MACD will cross shortly on another upturn but frankly with the lines so close
together it is not giving very good signals at the moment. Another
thing to bear in mind is the Relative Performance which as the upper chart
below shows the BSE underperforming the rest of Asia quite sharply if you
take the zero line from the start of this year. A lot of this has to do with
the very high levels we ended last year at but it is nevertheless low. --- 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. We may well have had the ‘reaction low’ I’ve been talking about and it
has been relatively shallow. Have a close look at the 2006 downturn for the
reaction low then. 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 |
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