UAE markets are experiencing a minor correction lower, but the medium-term outlook remains bullish. There is no sign that selling is becoming more intense and the ascending medium-term trends remain well in place. Bearish sentiment that is beginning to show up in global equity markets such as Hong Kong, UK and Germany, but there are no indications so far that the UAE is being impacted.
Dubai
Last week the Dubai Financial Market General Index (DFMGI) dropped by 27.52 or 1.39 per cent to close at 1,948.27. Market breadth was even with 13 advancing issues and 14 declining, while volume fell from the previous week. The DFMGI is now higher by 21 per cent for 2013.
For the past seven days the index has consolidated in a tight range near the recent peak of 1,959.37. In other words, it continues to consolidate in the area of prior resistance and now support which supports a positive outlook. A trend continuation signal was generated two weeks ago with the odds favouring a shallow pullback followed by a move above the recent high, or a breakout in the near-term from the current short-term consolidation pattern. In the case of an upside breakout the DFMGI would then be targeting resistance around two peaks from 2009, at 2,201 and then 2,409.
Near-term support is roughly around 1,996 down to 1,870. A drop to below the lower level puts the index below weekly support thereby increasing the odds that it will either fall further from there or consolidate. The 1,819.50 to 1,812 area would be the next potential support level after that, followed by a zone from approximately 1,767 to 1,755.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) fell by 38.39 or 1.23 per cent last week to close at 3,088.97. This decline comes after a rally to a three and a half year high of 3,140.13 hit in the early part of last week. The index has gained 17.7 per cent in 2013 as of last week’s close. So far the pull back is normal and to be expected. There are no signs at this point that selling pressure might get more intense. Market breadth was close to even with 19 advancing issues and 18 declining, while volume fell slightly from the prior week.
The next identified long-term resistance zone above the recent high of 3,140.13, is around 3,269.92, the peak of the rally coming off the low from the 2008/09 crash. How the ADI reacts to various support levels on the way down, assuming the current rest continues in the short-term, will tell us something about its potential to continue higher in the foreseeable future.
Near-term support is first around 3,069.20, followed by 3,053.55, then 3,059 (weekly support), and then 3,028.09. A daily close below the lower level begins to change the angle of ascent for the four-month uptrend while also being below a prior week’s low or support. That would be possibly an early sign that the ADI may spend more time consolidating in a range or decline further from there. In the case that it falls further keep an eye out for support around 2,935.61, the bottom of the prior retracement from earlier this year.
Bruce Powers, CMT, is a financial consultant, trader and educator based in Dubai. He can be reached at bruce@etf-portfolios.com
