US shutdown causes ripple effects

By Marc Castro

Oct 06, 2013 06:27 AM EDT

The hope that US politicians find a way to break the gridlock this week to end the government shutdown as well as a debt default looked set to support from Gulf markets were set. This despite short-term technical issues which can pull down any possible gains present in the situation.

US stocks together with global oil prices jumped last Friday partly due to hedging for a deal between the conflicting parties in the US budget impasse would be reached soon. There is an expectation that this process may remain in the next few weeks and once lifted, a global rally in stock markets would occur.

The problem though is the short-term technicals shown in several Gulf markets have weakened int he past weeks. One such market is Dubai, when it closed off its intra-day high last Thursday as the 14 day momentum resulted in a negative divergence. This is one of the classic signs of a temporary stoppage in the trend. The index also had immediate support of about 2,750 points, after it had peaked last August.

For its part, the index of Saudi Arabia had established significant resistance, registering 8,070 points in the recent weeks as the 14 day momentum for the Kuwait market had declined to less than zero last Thursday.

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