WeeK 09-2020 Closing Notes

Corona scare continued to wipe out stocks markets globally sparing no mercy for KSE100 either. Index has hits its all time low of CY2020 and technical indicators have fallen to their lowest presenting a possibility of dead cat bounce. Although the index has posted recovery during last two trading days, it is not supported by trading data which rather shows capital drain from the market. 

WoW basis, average market capitalization has posted its highest drop of 2020 with literally neutral growth in last two trading days of week. 

Due to presence of multiple supports around 37900 +/- 100, this area may provide a cushion so downfall is expected to slow down here. But looking forward we expect the index to possibly retract in a "dead cat bounce" move with resistance falling in the range of 39800 +/- 100. Closing above 40500 +/- 100 is required to initiate possibility of trend reversal. Whereas, a continuous downfall may push the support zone lower than 37900-37700 +/- 100. 

Only expected positive trigger ahead is possible reduction in interest rate which should improve money flow into the market. However, the impact and public perception of Corona virus is difficult to judge. Therefore, our short to mid term opinion on market remains bearish unless there is substantial change to nullify this opinion. While Corona scare has played instrumental in pushing markets downwards, so far they have not broken out of their technical range and remain predictable. A market trading out of its technical range for too long can be depressing at best. 

Important dates ahead for MTB auction are Feb 26th, Mar 11th, 25th while there is no PIB auctions for the rest of Feb and entire Mar 2020.

(Update 02-Mar: Complete range of index resistance is 38900-39300-39800 +/-100. Complete range was missing due to typing omission. Thanks to our readers for pointing it out. )


Source:

1. http://www.sbp.org.pk/ecodata/Auction-Bond.pdf
2. http://www.sbp.org.pk/ecodata/auction-treasurybills.pdf