Strong gains put UAE markets back in the game

No longer lagging UAE markets are top performers globally for 2013. Last week’s performance again improves the medium-term outlook and there are no signs of an end to the current rally.

Dubai

The Dubai Financial Market General Index (DFMGI) saw its biggest weekly gain since February last week, rising 127.29 or 6.53 per cent to close at 2,075.56. And the week ended strong, with the index closing at the highs. November 2009 was the last time the index saw a weekly close at this level. Volume improved over the prior week while market breadth supported strong gains with 20 advancing issues and six declining. Further, on a daily basis volume improved each day as the index moved higher.The DFMGI is now up 28.9 per cent for the year and is one of the top performing equity markets globally.

The next potential resistance area, relative to prior price action, is around 2,201 to 2,206, only six per cent above last week’s close. Given the strong upside follow through last week it looks like the DFMGI has a chance to make that price level in the foreseeable future. Once it surpasses that zone then the next target is up around 2,409, the peak from October 2009.

It’s interesting to note that the DFMGI moved above its 200 weekly exponential moving average (ema), a bullish sign for the long-term trend, several weeks ago. This is the first time since the financial crisis began that it has been above that indicator. As of last week it started moving higher and away from its 200ema, an additional sign of strengthening and supportive of growing optimism from investors.

Weekly support is now around 1,941. An expectation for higher prices in the medium-term is maintained as long as we don’t see a decline to below that level. A daily close below there would need to occur before the current strong upward momentum begins to be negated. Further down is support around 1,870.

Keep in mind that we began the current move four weeks ago from the 1,819.46 low. An initial trend continuation signal was given several weeks ago just above 1,900 with confirmation above the recent swing high of 1,959.37. In other words last week’s rally is not the beginning but rather a continuation of the trend and we are closer to either the middle or end of the current move.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADI) rallied 198.9 or 6.44 per cent last week to close at 3,287.87. Volume improved each day last week as the index strengthened, and also moved higher on a weekly basis. Strength was widespread among listings with 32 advancing and only nine declining.

The ADI has gained 25.2 per cent in 2013 so far making it one of the top performing equity markets globally along with the DFMGI. This strong performance will put UAE markets on the radar screen for global investors, helping to further strengthen positive investor sentiment for the medium and long-term.

From a technical perspective the ADI is leading Dubai higher. It has moved quite a bit above its weekly 200ema and as of last week surpassed a significant milestone on a technical basis. The ADI has now moved above and closed above, on a weekly basis, the October peak of 3,269.92. That was where significant resistance was seen on the way up off the January 2009 bottom, and puts the ADI above all prior significant resistance from the past four and half years.

The next area to watch for more significant resistance is from around 3,327 to 3,362. That is also near potential resistance of the long-term descending trend line which comes down from the 2005 highs. On the downside, weekly support is at 3,088.26, followed by 3,082.46, and 3,047.59.

Bruce Powers, CMT, is a financial consultant, trader and educator based in Dubai, he can be reached at bruce@etf-portfolios.com