Long-term symmetry in the Tadawul All Share TASI Index increases the possibility that a top may have been reached for now

list Sep 30, 2014 | Views 1235

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%).

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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.

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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. (


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