Weakening momentum but well supported

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The steep declines in the US market in the past one week dampened market confidence. Shares in Bursa Malaysia fell marginally lower after pulling back from its highest level year-to-date last Monday. The market however, was supported by a more bullish China markets.

Trading volume was marginally higher as compared to the previous week and continued to be supported by foreign institutions. The FBM KLCI declined only 0.2 per cent in a week to 1,852.66 points after pulling back from a high of 1,862.90 points last Monday. The low of the week was 1,848.19 points which was set last Friday.

The average daily trading volume in the past one week was 2.2 billion shares as compared to 2.1 billion shares two weeks ago. Average trading value was RM2.5 billion, lower than the previous week’s RM2.4 billion. From Monday to Thursday last week, net selling from local institutions was at RM362.7 million while foreign institutions were net buyers at RM354.6 million and local retail were at RM8.1. In the FBM KLCI, gainers beat decliners 4 to 3 despite although the index marginally declined.  Gainers were led by BAT (5.7 per cent), TENAGA (4.9 per cent) and IOICORP (three per cent) while decliners were led by SKPETRO (6.5 per cent), PBBANK (5.3 per cent) and HLFG (1.4 per cent).

 

Regional indices

Despite the decline in the US market, markets in Asia remained buoyant. The FBM KLCI rebound last Friday shows that there is still confidence in the local market as well. Singapore’s Straits Times Index declined 0.4 per cent in a week to 3,198.22.72 points. Hong Kong’s Hang Seng Index increased 2.2 per cent to 23,003.64 points and China’s Shanghai Stock Exchange Composite Index rose 3.5 per cent in a week to 2,130.54 points.

On Thursday, the US Dow Jones Industrial Average declined 2.4 per cent in a week to 16,170.22 points.

London’s FTSE100 Index declined only 0.1 per cent to 6,641.97 points and Germany’s DAX Index fell 1.8 per cent to 9,454.54 points.

Commodities

The US dollar plunged last week and caused gold prices to rally. The US dollar Index declined from 80.64 points a week ago to 79.45 points. COMEX Gold rose 2.4 per cent in a week to US$1,318.10 an ounce.

Crude oil was also bullish, increasing three per cent in a week to US$103.40 per barrel. The Malaysian ringgit strengthened against the US dollar, from RM 3.28 per US dollar a week ago to RM3.23. The stronger ringgit put pressure on crude palm oil prices as the discount against competitor soy bean oil narrows. Crude palm oil fell 1.7 per cent in a week to RM2,614 per metric tonne.

 

Observations

The pull back in the past one week did affect the bullish trend but caused it to slightly weaken. The FBM KLCI continued to stay above short term 30-day moving average which is currently at 1,836 points.  The index is also well above the Ichimoku Cloud indicator. Like we have mentioned in the past two weeks, the market should be able to remain bullish as long as the index can stay above the immediate support level at 1,840 points.

The pull back last week was not strong enough to form a resistance at 1,869 points, which is the highest intraday high year-to-date. Immediate resistance remains at 1,880 points.

Momentum indicators indicate that the momentum is still bullish. The RSI, MACD and Momentum Oscillator indicators remained above their mid-levels. However, these indicators slightly declined in the past one week and indicate a weak bullish momentum. Furthermore, the FBM KLCI is still above the middle band of the Bollinger Bands indicator after pulling back from the top band. However, these indicators may change if the FBM KLCI breaks below 1,840 points.

Technical indicators show that the bullish trend is still being supported well despite a slightly bearish sentiment last week. Stronger US dollar may also continue to attract foreign institutions.

The sentiment on Monday will be dictated on the US and Europe markets on Friday. Further decline will damper the bullish sentiment and the market may trend sideways. However, if these markets rebound, we may see strong rebound in the local market. Technically, the FBM KLCI is still bullish as long as it can remain above 1,840 points.

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis.

The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.