Daily FBM KLCI chart as at July18, 2014 using Next VIEW Advisor Professional
The local market rebounded earlier last week after a knee-jerk reaction towards the Malaysian Airlines crash in Ukraine two weeks ago but market was being cautious on a long weekend break for the “Hari Raya” celebrations.
The benchmark FBM KLCI index closed marginally higher on a week to week basis despite stronger performances from global markets. The FBM KLCI traded within the expected range of 1,864 and 1,880 points. However, when blue chips take a rest, second liners start to take centre stage.
The FBM KLCI increased only 0.2 per cent in a week to 1,877.34 points after trading in a range between 1,867.34 and 1,879.59 points on higher volume. Trading volume slightly increased last week to an average daily trading volume of 2.4 billion shares as compared to 2.3 billion shares two weeks ago. However, average daily trading value decline RM0.2 billion to RM2.1 billion.
This indicates that lower priced stocks, which are favoured by the retail market, are being traded more. Retail market has made a comeback two weeks ago. However, the retail market was net sellers. Total market valuation increased from RM1,774 billion to RM1,786 billion.
Local institutions were the supporters of the market as local retail and foreign institutions distributed. Net buying by local institutions from Monday to Thursday (excluding Tuesday) last week was RM363.8 million. Net selling by local retail was RM95.3 million and local institutions were RM268.5 million.
In the FBM KLCI, gainers edged decliners 17 to 11. The index was weighed down by PETDAG (8.1 per cent), RHBCAP (1.9 per cent) and SKPETRO (1.8 per cent) and gainers were led by BAT (4.1 per cent), FGV (3.0 per cent) and ASTRO (2.5 per cent).
Regional indices
Markets were bullish last week as economic data in the US showed that the economy was gaining traction. Singapore’s Straits Times Index increased 1.1 per cent in a week to 3,347.50 points. Hong Kong’s Hang Seng Index jumped 3.2 per cent in a week to 24,216.01 points, the highest level in three years.
China’s Shanghai Stock Exchange Composite Index rose 3.3 per cent to its three month high at 2,126.61 points. On Thursday, the US Dow Jones Industrial Average increased 0.3 per cent to 17,083.80 points. London’s FTSE100 Index increased 1.2 per cent in a week to 6,821.46 points and Germany’s DAX rose only 0.4 per cent in a week to 9,794.06 points.
Commodities
The US Dollar was stronger last week on positive economic outlook. The US Dollar index increased for the second consecutive week from 80.57 points to 80.96 points. This continued to put pressure on gold prices, which is normally negatively correlated with the US Dollar. COMEX gold declined 1.9 per cent in a week to US$1,294.10 an ounce. Crude oil was directionless and closed 1.7 per cent lower at US$102.00 per barrel.
Observations
The FBM KLCI failed to move back above the short term 30-day moving average last week. It failed to break above the immediate resistance level at 1,880 points and the short term average at 1,882 points. This clearly indicates that the market is still bearish in the short term.
The index, however, is just above the Ichimoku Cloud indicator and this indicates that the bullish trend in the long term is still being supported. The long term 200-day moving average is at 1,840 points. The FBM KLCI is expected to remain bearish if it can’t overcome the 1,880 points resistance level. Immediate support level is at 1,868 points.
Momentum indicators like the RSI and Momentum Oscillator stayed below their mid-levels, indicating a bearish momentum for the index. Furthermore, the MACD indicator continued to stay below its moving average and the index is at the bottom area of the Bollinger Bands indicator. However, the bearish momentum is weak as there has been an increase in these indicators in the past one week. Only a fall below the immediate support level could trigger stronger selling momentum.
We are definitely going to expect a quiet market as there is going to be a week-long celebration. However, expect retail market to be active and penny stocks to be in play.
Generally, the developed markets which open when Malaysia is on holidays will determine the direction of the market this week. I am expecting a sideways trend for the FBM KLCI this week with a range between 1,870 and 1,880 points. A breakout above 1,880 points would push the market back into an up trend and this could set the FBM KLCI to test historical highs.
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.