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On The UAE Sell-off

Posted: 05/20/2014 - 9:15 am

On May 18, we highlighted the weakness in the UAE market and we said that the sell-off that took place on May 15 was a validation of the May 11 volatility shock especially since the weakness spread to the heavyweights.

Our advice was to exit no less than 50% to 70% of ALL open positions despite the fact that we only had open positions in Emaar, Dubai Islamic Bank and Waha. We also stressed the importance of coupling any remaining positions with predefined stops (read: It Doesn’t Look Good).

At the risk of stating the obvious, the UAE market experienced a crash-type sell-off yesterday and the move comes as further validation to our recent warnings.

Volatility has clearly increased and though we could see intermittent rebounds in the market, this is not a time to buy in our view.

We believe the market has further room to drop and we are not in the game of playing intraday or swing moves.

The risk outweighs the reward at this point and we stay in cash until otherwise indicated by the price action.

To end this on a positive note, we remind you that the market has never had a healthy correction since the beginning of 2013 and though a sizable correction may seem scary, it is healthy and it sets the stage for great buying opportunities in the weeks or months to come.

Trade safely.

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