In an environment where geopolitical tensions are escalating, particularly between Israel and Iran, investors are closely watching the TA-35, an index tracking the 35 largest companies on the Tel Aviv Stock Exchange. The TA-35 Index serves as a barometer of the economic pulse of Israel and, by extension, how the country is navigating the troubled waters of regional conflict.
- Important Note: The analysis provided herein is intended solely for informational purposes and should not be construed as financial advice.
Tel-Aviv stock market in times of tensions with Iran
Who cares about Israel and Iran, I trade other stocks…
We don’t fully know why, but the Middle East tensions often play a role on global sentiment and equities, more than some people would expect. It is not only oil or other defense sector stocks, but other elusive sentiment waves ripplinig through financial media. I always wondered why Al Jazeera seems utterly obssesed with its focus on Israel as it seems that there is almost no other news in the world and Israel must always be the blame of every bad thing happening in this troubled region… Oh, how convenient.
But whatever your views are, and God bless you, the geopolitical tensions do have at least a heavy sentiment factor on your stocks, too.
Understanding the TA-35’s technical outlook
No one knows what the future will bring. I sure don’t. But I like to identify probable pattern continuations as happened in the past. For example, on certain timeframes, after a breakout, the price does not just continue to shoot up straight away, but declines to retest the breakout line/area. Or that bull flags, after being broken to the upside – are often retested in the future, and even more than once.
The following daily chart of TA35 exhibits a bull flag pattern, suggesting a continuation of the uptrend upon a successful retest. Retesting of the pattern often validates the previous breakout, offering possible upcoming insights into market sentiment and when it may turn positive after being negative, if this happens… FOLLOW THIS POTENTIAL MAP AND WATCH FOR A REVERSAL AROUND 1830, IF IT GETS THERE. According to this scenario, the index tracking the 35 largest companies on the Tel Aviv Stock Exchange has got another 5 to 6 percent down before the reversal area. If the US stock market, especially Nasdaq futures, declines another 5 per cent or so with it, then both may then be ripe for an early bet to reverse up. It would be an early and interesting bet, even for the swing trader.
TA-35 daily chart with potential retest trajectory
Sectors under the microscope
Defense and security
- Examples: Companies such as Elbit Systems and Israel Aerospace Industries, which may experience increased demand during times of heightened security concerns.
Energy
- Examples: Firms like Delek Drilling and Isramco Negev 2 LP, which could be affected by changes in global oil prices and energy demands.
Technology
- Examples: Globally recognized names such as Check Point Software Technologies and Wix.com, which might face mixed impacts based on the global economic outlook.
Watch the price of oil
The price of oil has historically been a sensitive indicator of Middle Eastern geopolitical tensions. Here are two examples that illustrate this relationship:
-
1973 Oil Crisis:
- Event: The Yom Kippur War led Arab oil-producing nations to impose an embargo against the United States and other countries that supported Israel.
- Oil Price Response: Prices of oil quadrupled, from roughly $3 to $12 a barrel.
- Economic Impact: The crisis triggered a stock market crash and led to a global recession, with long lines at gas stations and severe economic disruptions worldwide.
-
1990-1991 Gulf War:
- Event: Iraq’s invasion of Kuwait in August 1990 sparked immediate concern over the security of oil supplies.
- Oil Price Response: Crude oil prices doubled, with prices jumping from $15 to as high as $41 per barrel.
- Economic Impact: This price surge contributed to a recession in the early 1990s in the United States and other countries, illustrating the global economy’s vulnerability to Middle Eastern geopolitical dynamics.
These examples underscore how regional tensions can rapidly alter the supply and perceived security of oil, thereby influencing global prices and economic stability.
The provided technical analysis, including the forecasted path of the TA-35 index, serves as an opinion and a possible tool for investors, at their consideration, to gauge potential market movements. However, it’s essential to combine such analysis with a comprehensive understanding of current events and their possible economic impacts. The graph chart of TA35 in this article is used to demonstrate the technical patterns discussed and is not indicative of future market movements. Visit ForexLive.com for additional views, opinions, news, and analyses.