What an exciting month it has been. Investors on the Karachi Stock Exchange have welcomed the New Year with a strong sense of optimism that doesn seem to show any sign of fading away any time soon.
Standing at its 340-day high of 9923, the KSEs 100-index is at a critical location as Technical Analyst, Qasim Anwar, pointed out in AKD Securities latest recently released Pakistan Market Strategy 2010.
Yet, and despite the $15.5 million worth of selling by domestic retailers in the regular market, many market participants across the board are quite bullish - citing 12000~12500 levels in the medium term.
So far this month, equity prices have been propped up by foreign buyers (and not local investors) who poured in $16.67 million in January to-date compared with $4.16 million in December. And the kind of growth in profits, sell-side analysts have been expecting for the earnings season ahead, one wouldn be too surprised if the market crosses 10,000 between today and month end.
The question is how far it will go. In early November this column suggested that if KSE bulls are still interested in reaching 10400~10,800 points in early 2010, they seem to have little choice but to retrace their steps back to 8700 points at least once (with downside limited to 8400) before gathering momentum to make their final move. And so they nearly did.
The market dropped to 8734 points on November 10, following which the index churned between 8800-9400 up until about late-December, preparing bulls to attempt for summit 10000 yet again after the New Year.
The key at this point, however, is that even if the market crosses the so-called psychological barrier, the overhead resistance at 10500~10700 points is still as intact, as perhaps Fort Knox. If equity prices don crumble from that point onwards - chances of which seem more unlikely - and remain persistently northbound, it would require an extraordinary brave man to stay aggressively bull, until the market races higher to its next check point at 11300-11400 level.
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