Two weeks ago, the market was directionless and I have mentioned that there is a bearish divergence on the FBM KLCI that indicates weak bullish momentum and that the FBM KLCI is expected to consolidate sideways between 1,850 and 1,870 points. The FBM KLCI declined marginally as the market continued to be uncertain last week.
Jittery and mixed markets performances globally caused investors and traders to be cautious, especially on slower China economic growth. The FBM KLCI was almost unchanged in a week, declining only 0.1 of a percent to 1,866.72 points after trading in a range between 1,853.31 and 1,869.38 points.
Market continued to be cautious on lack of catalysts and mixed global market performances and the FBM KLCI was dragged down by heavy selling in Petronas Dagangan Bhd. Trading volume continued to decline last week.
Average daily trading volume in the past one week was only 1.7 billion shares as compared to 1.9 billion shares two weeks ago. Average trading volume was at RM1.7 billion as compared 2.1 billion two weeks ago and this indicates that retail investors are starting to increase in activity.
Foreign institution continued to be net buyers from Monday to Thursday last week. Stronger Malaysian ringgit may be the catalyst for foreign buying. Net buying from foreign institutions was RM169.8 million and net selling from local institutions and retail were RM156.8 and RM13.0 million respectively. In the FBM KLCI, decliners marginally beat gainers 17 to 13. Decliners were led by PETDAG (11.9 per cent), BAT (1.5 per cent) and ASTRO (-1.1 per cent) and gainers were led by AXIATA (2.2 per cent), KLK (2.2 per cent) and IOICORP (1.4 per cent).
Regional indices
Markets were directionless last week and this is a sign of cautiousness. Singapore’s Straits Times Index was almost unchanged in a week at 3,252.13 points. Hong Kong’s Hang Seng Index declined 1.8 per cent in a week to 21,862.99 points and China’s Shanghai Stock Exchange Composite Index declined 0.7 per cent in a week to 2,011.14 points. On Thursday, the US Dow Jones Industrial Average was firm in the past one week and closed at 16,550.97 points. However, London’s FTSE100 index increased only 0.4 per cent to 6,839.25 points and Germany’s DAX closed almost unchanged in a week at 9,607.4 points.
Commodities
The US dollar index rebounded strongly last week after the US Federal Reserve’s (Fed) commitment to continue keep interest rates low until the economic growth is steady. Crude oil rose while gold decline, both marginally. The US dollar index increased from 79.56 points two weeks ago to 79.8 points.
COMEX Gold declined only 0.8 per cent in a week to US$1,289.6 an ounce. The NYMEX WTI crude rose 0.7 per cent in a week to US$100.70 per barrel. The Malaysian ringgit strengthened against the US dollar on the Central Bank’s decision to maintain its policy rates. The ringgit strengthened from RM3.26 per US dollar in the precious week to RM3.22. Crude palm oil continued to decline marginally, falling only 0.6 per cent in a week and to RM2,576 per metric tonne.
Observations
The FBM KLCI remained in a sideways correction of a short term up trend and formed a triangle chart pattern. The index continued to be supported above the 30-day moving average. The index is still bullish remains bullish and there are no signs that the trend may be changing except for the weaker bullish momentum in the short-term.
The short-term or immediate support level is at 1,845 points. The immediate resistance level is at 1,870 points. The bullish trend should be able to continue if the index is able to break above the immediate resistance level.
However, the weak momentum indicates that the possibility of the index climbing higher is low. The momentum indicators like the RSI and MACD is still in a divergence against the FBM KLCI and this indicates that the resistance is getting stronger and hence the weaker bullish momentum.
The indicators basically show that the market is uncertain. However, this would change of the index breaks above the resistance level at 1,870 points or below the support level at 1,845 points.
A breakout above 1,870 points would confirm the triangle chart pattern with a target at 1,900 points. A break below 1,845 points would cause confidence to weaken and the next support level the index would test is 1,800 points.
Continue to expect the FBM KLCI to consolidate further between 1,850 and 1,870 points with a bias towards the lower level because the index is near the resistance level.
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.