By Mark DeWeaver.
This week saw a dramatic turnaround in Iraqi stocks. Last Thursday’s selloff (see this post) accelerated into a mad dash for the exits on Sunday, with the RSISX losing 4.3% on virtually no advancing volume and 60% of the trading in limit-down stocks. On Monday the index fell another 3% to bottom at 1603, just north of long-term support at 1600, a level that hasn’t been tested since January, 2013.
Stocks moved up sharply for the rest of the week, particularly on Wednesday, when not a single stock declined and heavyweights BBOB, BNOR, and BUND closed limit up after closing limit down only three days before. By the Thursday close, the market had recovered about half of the previous two weeks’ losses. (See chart.)
This week’s action mirrored the situation on the battlefield quite closely, with the 1600 support level serving as a market analogue for the army’s line of defense at Samarra. Indeed Iraqi stocks now seem to have become almost entirely a play on the progress of the security forces.
Given that the insurgents are unlikely to push farther south, this suggests that the market is unlikely to see further steep losses. But for the RSISX to bounce all the way back, the front may have to start moving north.