Osama bin Laden is dead. So is much of the influence his organization built with the attack on the World Trade Center in 2001. Al-Qaeda, however, lives on through a collection of like-minded Islamist militias holding territory and threatening to redraw the map in the Middle East and North Africa. Inspired by bin Laden’s jihad and hardened by battle, they have capitalized on the security and political vacuum left by the toppling of autocrats in the 2011 Arab Spring. They feed off the area’s sectarian and tribal conflicts, and are united by an ambition to bring new states with strict interpretations of Islamic law to the Arab world. The region’s governments are mired in a battle to fight them, while the U.S. and its allies struggle to form a response.
How is this affecting some of the region’s better performing stock markets which are often momentum plays?
Among those untroubled by civil wars, Dubai and Saudi Arabia surged higher from approximately April 2013. Dubai peaked a week before Saudi Arabia and both have formed spike peaks of at least near-term significance. Abu Dhabi commenced its advance earlier, at yearend 2012, and also peaked earlier having lost upside momentum last April.
Little Kuwait, which borders Iraq at the top of the Persian Gulf, bottomed in November 2012 and exploded higher before peaking in May 2013. It is still trending lower beneath a V-bottom with right-hand extension top formation but is currently technically oversold on a short-term basis.
The UAE has considerably underperformed and remains rangebound.
Israel experienced the first of three downward dynamics at yearend 2013. The second occurred a month later in January, before the TA-100 resumed its uptrend until recording the third setback in April, following the high to date near 1300. The downward dynamics warn that supply has been increasing to the point where it may now have actually exceeded demand.
In conclusion, the previously better performing Middle East stock markets, led by oil producers, have clearly formed peaks of at least near-term and probably medium-term significance. Downside risk remains and clear evidence of support building will be necessary to provide convincing evidence that demand is regaining the upper hand beyond temporary technical rallies.Back to top