COMI,USD Index & the January Effect

COMI,USD Index & the January Effect

19 August 2015, 21:30
Muhammad Elbermawi
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I really love inter-market Analysis as it gives me a better view for the big picture. This blog is about the correlation between Financial Sector and Currency Market. It is about a market phenomenon known as "January Effect".

The first chart we have here is a monthly chart for the Dollar Index.


As we can see from the chart the Dollar Index made its yearly High or Low in January/February for 17 years from the last 21 years. This phenomenon is known as the January Effect. And it gives an 81% probability on how will the year ends for the Dollar Index.

The January Effect principle is that if the market didn't break the lowest low of January or February then there is a great chance that we will have a Bullish year and If the market or security didn't break the highest high of January or February then we have a great chance to have a Bearish year.This was so clear on the chart of historical price for the Dollar Index.

Now I will show the chart of the Commercial International Bank - Egypt (COMI) as an institution that depends mainly in its daily job on currency market exchange.


As you can see from this chart COMI follow the January Effect principle exactly as USD Index. It use January / February Highest High /Lowest Low as a Support & Resistance levels that push the price all the way until the end of the year.

I've chosen COMI as it is one of the highest price weighted components of the famous EGX30 Index but I didn't study if the January Effect Phenomenon exist with other financial institutions from the same sector.

Until today both USD Index & COMI is still finding the Low of January 2015 to be an important support which might not be broken until the end of 2015, but if this supporting area is broken to the downside in the future it will mean that we got one of those rare times when the January Effect Phenomenon lose its control on the currency market and financial industry.

Regards

MB  

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