The last seven trade sessions at the Karachi Stock Exchange have been very exciting. Twice the market tried to kiss the psychological barrier of 10,000 points. But both times it failed, limiting the market's rise to 418 points to close at 9768 on Friday - down from its 13-month high of 9937 hit on Thursday. Turns out market participants are still thinking whether to side with the bulls or the bears.
The retreat from near 9950 points twice in the week shows the momentum is rather weak. The broader market - assessed by the advance-decline ratio - has been weakening in the favour of bears of late. Volatility is also troubling for some investors as average swings between intraday high-low have risen to about 220 points in the last 15 odd sessions, compared with 175 points in the preceding fortnight and 136 points in August.
Thus, there appears to be a tug of war between local and foreign investors; the former, save for limited buying by mutual funds, have been creating a selling pressure whereas the latter have been buying rather aggressively. While foreign investors are in frenzy because of cheap valuations relative to the region, this 'thinking behaviour' on part of domestic investors can be attributed to one lingering question overhanging the discussion on the trading floor: the future of Kerry-Lugar Bill and, of course, its consequences.
At one end, investors are wary of the potential political rifts - especially between the army and the parliament - but at the other, there are some who see political backlash as a possible bullish trigger. "Severe backlash against some conditions in the Kerry-Lugar Bill from domestic power brokers....may lead to changes in these conditions in a revised bill, or sweetening of the pot", so noted the recently released research note 'Investment Perspective' by BMA Funds.
So, had it not been for the series of weekend attacks, the market looked set to test 10k levels for the third time in the current rally. Albeit, that wouldn't have lasted long, with more chances of retracement to 9300 points given the softening of the momentum, which has nearly marked the peaking of short-term spike that began mid last month.
But, with attacks - especially the one near army headquarters - the picture has become a bit bleaker, as rising security risks may keep foreign investors at bay, at least until the dust settles. This, coupled with looming uncertainty in minds of local investors can keep the market fragile.
The only trigger that can push the market higher, perhaps, is the confirmation of whispers that central bank will give FSV relief to banks. But with BR Commercial Bank Index gaining 10 percent this month, it looks like, the noise, if confirmed, will trigger a buy-on-rumor-sell-on-news reaction.
Yet, while a cautious stance is likely to be adopted by investors this week, medium term investors will continue accumulating stocks at lower prices eyeing 10400~10700 points by spring - limiting the immediate downside risks to 9300~9500 level.

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INVESTMENT FLOWS BY INVESTOR TYPE
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Net buying/selling in regular market
                       - OCT '09 to date
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                                  $ (mn)
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Foreign Individual                (0.09)
Foreign Corporate                  30.99
Overseas Pakistani                  0.08
Total FIPI                         30.97
Individual                       (24.61)
Companies                        (12.45)
Mutual Funds/Others                 6.09
Total LIPI                       (30.97)
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