Earlier this month the TASI encountered resistance at 11,159.5, the high for September and a 6.7 year high (80 months). That high put the index 142.2% above its 4,608.08 low from 2009, and above the 38.2% Fibonacci retracement level of the full downtrend coming off the 2006 high of 20,966.6. Since then the index has fallen as much as 4.9%, to a low 10,614.10. Given the below analysis, the argument for a deeper correction in the near-term is strengthened.
The first chart is a nine-year monthly chart of the TASI. The most obvious higher resistance zone is around 11,738.7, the peak from 2007/08 and also support and resistance over a number of months prior to that peak. This month’s high of 11,159.5 is 5.2% from the 2007/08 peak.
The performance of the various significant swings over the nine-years are marked. Note that two of the down swing were relatively close in percentage terms (68.3% and 60.7%), and two of the upswings were close (50.6% and 51.9%).
The second chart focuses on the uptrend from the 2009 low, where an AB=CD pattern is identified. You can see that the percentage advance of the CD leg is almost an exact match of the AB leg, 73.7% versus 72.4%. Also, the CD leg is approximately a 141.4% (square root of 2) extension of the AB leg (11,141.1 versus the actual current peak of 11,159.5). Further, an 88.6% Fibonacci retracement of the down swing from the 2008 high is at 10,864.25, in the same general price zone as the current peak and the above measurements
For those familiar with harmonic patterns, a bearish Bat pattern has formed in the TASI, triggered at the 88.6% retracement level, as the B peak was approximately a 50% retracement, and the C leg a 38.2% retracement.
This analysis indicates that a higher level of caution may be called in the Saudi market, especially if further weakness is forthcoming and accompanied by higher volume and a pickup in downward momentum. In that case, a minimum retracement to the 38.2% Fibonacci level of 8,450.58 becomes more likely, before the TASI moves to new highs for the uptrend