TA-25 rally running out of steam [pg. 17]

After a sharp move lower immediately following the start of fighting in the North, the TA-25 has rallied 10% from its intra-day low on July 16 and is now trading at a one-month high. Investors, however, should not assume that this rate of ascent will continue. In the first days of the conflict, there was huge volatility in the stock market, as investors sold in a panic and then bought back in when the index appeared to have fallen too low. However, as the fighting entered its second week, traders and investors alike seemed less nervous, and the index consolidated around the 780 level. Over the last year, 780 has proven to be a significant level of support as every time the index fell to that point it rallied again, indicating that people were happy to become buyers at this point. With the index fairly steady around 780 over the last week, it appeared that a base was formed on the graph, and Monday's jump to 800 seemed to suggest brighter prospects for the TA-25 in the short-term. Traders, however, are not convinced the climb will continue. "The [TA-25's] technicals appear weak, and we would remain sellers unless it broke back up through 825," said Oli Greenspan, a London-based trader at Hamilton Court Capital, pointing out that the market was still in a downtrend, based on the charts, regardless of the mini-rally of recent days. Avi Weinreb, of Clal Finance Batucha in Tel Aviv, was slightly more positive in his outlook, but believes it unlikely the market will push much beyond 850 in the short-term. "Monday's rally is a reaction to the news that a cease-fire could come within the coming week or so," he commented. "The buying is being driven by domestic investors and, coupled with positive recommendations from overseas analysts, the market could run up to around 850." Nevertheless, he cautioned that light trading volumes over the summer period could affect the rate of ascent. From a purely technical outlook, however, there is little on the charts to suggest a reason for the index to rally much further than it stands at present. Technical analysis is the study of trading based on previous performance, focusing exclusively on price movements rather than the fundamentals of the index/security involved.