So, the KSE100 Index has finally broken and closed below both the 20-Day EMA (Exponential Moving Average) and the lower band of the up-channel that formed in early February (see chart), and quite convincingly at that. However, it hasn’t yet broken market structure to the downside and is sitting on a crucial support line that has held for days and weeks.  Ordinarily, the weight of (technical) evidence is enough to indicate a break below the support that held as recently as February 24, and again today (Monday). Yet, with the government expressing optimism about crucial IMF talks—which will determine the fate of the EFF (Extended Fund Facility)—any favorable news, if it arrives in time, will ensure at least a temporary bounce, even in the most dire circumstances.  Otherwise, momentum oscillators are declining, and volatility—as measured by the 14-period ATR, as well as Bollinger Bands and Donchian Channels—is diminishing, as is volume. 

All of this points to increasing fear in the market as it continues to consolidate after the furious bull run of the last year and a half.  Long story short, our focus has shifted from the interplay of support and resistance of the up-channel and the important 20-Day EMA to the support level around 111,857. Should this level give way, as is very likely, there’s nothing to hold the market until the next support, provided by February 6 low, at 109405.53

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