Daily FBM KLCI chart as at July18, 2014 using Next VIEW Advisor Professional
The market continued to decline after a pull back two weeks ago when BNM increased the OPR 25bps to 3.25 per cent on Thursday. Last Thursday, another event shook the local market and that was Malaysian Airline System Bhd (MAS) flight MH17 which crashed in Ukraine and was suspected to be gunned down. Share price of MAS fell 11 per cent to RM0.20 on Friday. This spooked markets in US and Europe as the Ukraine and Russian was still on-going. It was a knee-jerk reaction in the local market as players took pre-cautions after the market rebounded earlier in the week. The index gapped down last Friday but rebounded to cover some losses.
Last week, I was expecting the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to trade lower with a range between 1,873 and 1,886 points. The FBM KLCI declined 0.5% in a week to 1,872.97 points after trading in a range between 1,871.4 and 1,895.02 points.
Trading volume increased last week to an average daily trading volume of 2.3 billion shares as compared to 1.8 billion shares two weeks ago. Average trading value increased only RM0.1 billion to RM2.3 billion. Total market valuation declined from RM1.788 billion to RM1.774 billion. This somehow indicates the return of retail investors.
Penny stocks have seen some good action last week, especially SUMATEC which has increased more than 30 per cent in a week. Local market participants were the main sellers last week while foreign institution supported the equity market. Net buying by foreign institutions from Monday to Thursday (excluding Tuesday) was RM193.9 million while net selling by local retail was RM79.7 million and local institutions was RM114.2 million.
In the FBM KLCI, decliners outpaced gainers nine to five. The gainers were led by HLFG (six per cent), BAT (2.7 per cent) and UMW (1.4 per cent) and decliners were led by PETDAG (2.5 per cent), IOICORP (2.5 per cent) and FGV (2.4 per cent).
Markets were generally bullish last week and could have been more better if it wasn’t because of last Friday’s decline which may be caused by the MH17 crash. Singapore’s Straits Times Index increased 0.5 per cent in a week to 3310.53 points.
Hong Kong’s Hang Seng Index increased one per cent in a week to 23,454.79 points and China’s Shanghai Stock Exchange Composite Index increased 0.6 per cent to 2,059.07 points. Japan’s Nikkei 225 Index rose only 0.3 per cent in a week to 15,215.71 points. On Thursday, the US Dow Jones Industrial Average increased 0.3 per cent to 16,976.81 points. London’s FTSE100 Index increased one per cent in a week to 6,738.32 points and Germany’s DAX rose one per cent in a week to 9,753.88 points.
The US dollar was stronger last week on better economic data (better hires) and caused precious metals to pull back from its bullish rally. The US dollar index increased from 80.17 points to 80.57 points. COMEX gold declined 1.3 per cent in a week to US$1,318.70 an ounce. Crude oil rebounded after four weeks of declines.
Crude oil in NYMEX continued to increase 0.8 per cent in a week to US$103.75 per barrel. The Malaysian ringgit remained firm at RM3.18 to a US dollar. Crude palm fell for the third straight weeks, declining 1.6 per cent in a week to RM2,308 per metric tonne.
The decline last Friday caused the FBM KLCI to fall below the short term 30-day moving average, the first time since the middle of June. It also broke below the immediate support level at 1,880 points. This indicates that the short term trend has turned bearish.
However, the index is still above the Ichimoku Cloud indicator and is at another up trend line support level from a short term up trend which began in April. The decline, however, was supported. We still cannot define the trend to be bearish unless the FBM KLCI fails to break above 1,880 points in the next one or two weeks.
Momentum indicators also indicate that the momentum has turned bearish. The RSI indicator fell below its mid-level and the MACD indicator crossed below its moving average.
The index has even fallen lower than the bottom band of the Bollinger Bands. These indicators indicate strong bearish trend. Furthermore, the index is above a thin Ichimoku Cloud and this means that the support may be weak.
The market may turn bearish if it does not rebound this week. The FBM KLCI has to close above 1,880 points to resume its bullish mode and create good sentiment but if it fails to do so, we may expect further downward correction and the next support level is at 1,840 points. I would expect some rebound this week and the index to trade between 1,864 and 1,880 points. I believe that the retail market will be back this week after SUMATEC’s performance and stocks like SONA and CLIQ would be in focus.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical 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.