Another unsustainable rally based on commodities
Following the recent oil rally, the Russian equity index has also rallied about 30%. However, this - like the oil rally and the Petrobras rally I posted about - is unsustainable.
See my post attached here for why the oil rally is unsustainable.
Why is RTS unsustainable?
Firstly, it is likely to follow oil's possible move down.
Secondly, Russia is still in quite a severe recession.
Thirdly, Russia's economy is forecast to contract 1.5% this year.
As long as the outlook for oil looks poor (as it does in my opinion), then the Russian equity index shouldn't be making rallies of 30%.
Technicals
The market has hit a strong level of resistance, as indicated by the upper horizontal black line.
See my post attached here for why the oil rally is unsustainable.
Why is RTS unsustainable?
Firstly, it is likely to follow oil's possible move down.
Secondly, Russia is still in quite a severe recession.
Thirdly, Russia's economy is forecast to contract 1.5% this year.
As long as the outlook for oil looks poor (as it does in my opinion), then the Russian equity index shouldn't be making rallies of 30%.
Technicals
The market has hit a strong level of resistance, as indicated by the upper horizontal black line.
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