Volatility in international equity and commodity markets rose last week due to uncertainty and fear over the Greek debt crisis and worries associated with the US economic recovery. Now that the news of a postponement on the decision by MSCI to upgrade the UAE equity markets to emerging markets is out, this uncertainty and fear seems to have entered the local markets. Recent price behaviour in the UAE markets was not solely associated with a potential MSCI upgrade, but it may have been providing a psychological cushion against gloomy international expectations. Last week the Dubai Financial Market General Index (DFMGI) declined 63.5 or 3.97 per cent to close at 1,537.48. Volume declined to the lowest in seven weeks. Although not as reliable an indicator in these markets, lower volume can be considered less bearish than an increase in relative volume. Market breadth was clearly bearish with 26 declining issues and only four advancing. The DFMGI held resistance in the area of its 200 exponential moving average (ema) early in the week prior to declining the remainder of the week. A weakening signal was indicated on a break below the uptrend line on Wednesday, while weakness was confirmed on Thursday as the index broke below support of 1,545.62. These are signs that the 16 week uptrend is weakening and that further declines are now possible. The next support zone is from 1,519.49 to 1,512.59. A close below the low of this zone confirms that the DFMGI is likely going lower as it signals a continuation of the downtrend begun from the April 21, 2011 high. At that point the odds increase that the DFMGI will fall at least to the 61.8 per cent Fibonacci support level at 1,473.44. This Fibonacci analysis identifies the degree of retracement of the uptrend measured from the March 3, 2011 low to the April 21, 2011 high. Important long term support is at 1,455.01, the low from July 2010, followed by 1,428.09, the low from early February 2009. The DFMGI broke through these levels once already in March of this year, then quickly rallied back above. A close of the index below 1,512.59 puts these lower levels at risk of being reached once again. The expectation at this point is that support would be found in the area of the 61.8 per cent support level, but if not then in the area of these two long term support levels. As anticipated, last week the Abu Dhabi Securities Exchange General Index (ADI) moved into a short term corrective mode declining 44.76 or 1.62 per cent to close at 2,7162. Some degree of pullback or consolidation is to be expected after a previous three week rally that saw the ADI rise 7.0 per cent — low to high. Volume declined slightly from the previous three weeks while declining issues beat advancing at 31 to nine, respectively. The trend characteristics of the ADI, including last week\'s price action, point to further declines in the short term. Last week\'s closing price was at the low of the period reflecting that sellers were in control till the end, while a more significant retracement is warranted subsequent to the breakout of a large symmetrical triangle consolidation pattern, which occurred three weeks ago. The symmetrical triangle pattern can be seen outlined on the accompanying chart. This current decline has yet to reach the 38.2 per cent Fibonacci retracement level (2,707.04) of the uptrend begun from the May 29, 2011 low, and would be the minimum decline we could expect to see. The next potential support area below that level is around 2,686.75. As long as the ADI stays above support of the downtrend line, which identifies the top of the symmetrical triangle pattern, a bullish medium term outlook is maintained. That price level will vary depending on when the ADI reaches it, if it does. Other potential support levels include 2,673.12, the 200ema on the daily chart, and 2,663.79, the 61.8 per cent Fibonacci price level. A number of listings that had been forming bullish trend continuation patterns are starting to weaken and could see declines instead. Emaar Properties broke minor trend line support on Thursday indicating that its two-month decline may have further to go. A close below Dh2.99 confirms further weakening. Arabtec Holding failed to move higher last week and is heading lower. Deyaar Properties is weakening with a close below Dh0.292 signalling bearish acceleration. Union Properties, discussed in previous weeks, is breaking down from its symmetrical triangle consolidation pattern, a bearish sign. Sorouh Real Estate has now turned down with further downside now likely. Dubai Financial Market never recovered well from the decline early in the year and is now showing bearish signs again. A close below support of Dh1.18 (close for the week) signals further downside, possibly down to the previous low of Dh1.08. From / Gulf News