David Fuller's view

Qatar’s upward acceleration and overextension relative to the 200-day (40 week) moving average left it very susceptible to mean reversion.  The Isis invasion of Iraq provided a trigger for this 4-week pullback.  However, support was encountered near the MA and the recovery rally is now in its third week.  At least temporary resistance can be anticipated near the late-May peak just below 14,000, most likely followed by a period of ranging.

Similar action has been seen by the Saudi Index, although the pullback was much smaller and has found support well above the MA.  At least temporary resistance can be anticipated near the June peak and psychological resistance in the 10,000 region.  Sideways ranging is likely and a close beneath 9,400 would suggest a further pullback towards the MA.  

Abu Dhabi also has a similar pattern to Qatar’s.  In contrast, Kuwait has had a much weaker pattern following its enormous upward acceleration last year which peaked in May 2013.  It has reached at least a temporary low following some downside overextension relative to the MA, but there is currently no confirmation that support near 6,900 will hold.  Additionally, it would most likely require further support building before overhead resistance can be significantly challenged.  

While the Middle East appears to have quieted down recently, the problems have certainly not gone away.  Isis appears to be another arm of Wahhabism and having been let out of Pandora’s Box, it will not be put back easily.  This column by Patrick Cockburn for The Independent: Iraq crisis: How Saudi Arabia helped Isis take over the north of the country, is fascinating and somewhat ominous.  

Brent crude’s significant retreat, now in its fourth week, is very good news for stock markets while it lasts.  A significant spike to the upside, had it occurred, would have been a real problem for stock markets, particularly in Europe and parts of Asia where energy prices are high and little or no fracking is occurring.  In the short term, crude oil is oversold and near some prior support within its lengthy range.  On a longer-term basis, the world increasingly has the technological knowledge to lower energy prices in real terms, although individual countries will need to be proactive to benefit fully.

Corn and wheat have slumped since May.  Soybeans and rough rice have seen smaller declines but these moves have certainly helped to lower potential food price inflation for staple grains and beans.  This is good news, particularly for poorer countries.  In the short term, these trends are at least temporarily overextended but the chart patterns are unlikely to support more than temporary technical rallies at this time.