The curious case of the KSE index

Fridays market action has clearly left KSEs bear proponents dumbfounded. They were silenced by the benchmark indexs closure at 10,882 - its highest since August 20, 2008 - with a momentum that saw turnover at its 6-month high.
Traders and brokers offer the following explanations behind last weeks rally: market gossips that the MTS would be approved anytime soon, the apparent easing of the stand-off on the issue of KSEs non-member chairman, SECP chiefs visit to Karachi and strengthening global oil prices.
Another incident that sprinkled euphoria on Friday was the meeting between KSEs top brokers and President Zardari on the energy crisis and overall economic management, which shows that the government is finally taking the capital market into confidence after a long, cold hiatus.
The rise in global oil prices, to which the revenues of several domestic oil exploration firms are linked, can be construed as a fundamental-trigger as oil stocks have heavy weight on the KSE-100. But apart from that, all other reasons are mostly sentiment-drivers and could possibly sag almost as quickly as they surfaced.
Even the so-called fundamental-trigger of rising global prices could eventually backfire. If oil boils to uncomfortable levels, the external account situation and inflation could easily worsen - the latter being stoked by corresponding increases in domestic fuel prices and electricity tariffs.
But since the index has crossed its key technical range of 10,700~10,770 points - levels that had previously proved to be strong resistance points - further rally towards 11,000~11,200 shouldn be surprising at all.
An ascent beyond that point, however, would be mind-boggling, though it may be justified by the spillover effect of continued quantitative easing in the West that has sent commodities, stocks, and other assets on a high, almost across the globe.
In the outgoing week, foreign investors poured in some $12.7 million in KSE equities, where local mutual funds, individual investors cumulatively sold stocks worth about $9.4 million - a trend that has been in vogue since January (see table).
This brings home the point that despite their juicy calls to buy/accumulate stocks, KSE brokers haven been able to woo local market participants into buying stocks. Perhaps it is because, as one mutual fund manager confided to BR Research, "it is best to keep selling at higher price levels, for prices clearly seem outstretched".