Daily FBM KLCI chart as at December 26, 2014 using Next VIEW Advisor Professional
It was a roller coaster ride for the stock market this year. The market was bullish in the first half of the year and even climbed to historical highs. However, the market turned bearish in the second half of the year as weaker ringgit and falling crude oil prices weighed down corporate earnings especially in the oil and gas, plantation and banking sectors.
Just a week ago, the FBM KLCI fell to its lowest level in 20 months. Not only all the gains made in the first half of this year were wiped out, gains made in year 2013 were also almost wiped out.
The FBM KLCI continued its bullish momentum last week and filled in the gap that we have expected and closed at its two-week high.
The market, including global markets, continues to rise for window-dressing towards the end of the year. Prices of commodities did not see much movement in the past one week and the Malaysian ringgit held firm against the US dollar. The FBM KLCI increased 2.8 per cent in a week to 1,764.44 points.
However, trading volume was low as most market players may be out for year-end holidays. The average daily trading volume in the past one week fell to 1.3 billion shares from two billion two weeks ago. The average daily value declined to RM1.4 billion from RM2.2 billion two weeks ago.
Foreign institutions were the main buyers in the past one week amid the low market participation. The net buying from foreign institutions last week (Monday to Thursday) was RM87.9 million while net selling from local institution and local retail was RM34.3 million and RM53.6 million respectively.
In the FBM KLCI, gainers trounced decliners four to one. Top three weekly gainers for in the index were Kuala Lumpur Kepong Bhd (9.1 per cent in a week), IOI Corporation Bhd (6.7 per cent) and RHB Capital Bhd (5.5 per cent) while decliners in the index were led by Hong Leong Bank Bhd (two per cent), Felda Global Ventures Holdings Bhd (0.9 per cent), and Astro Malaysia Holdings (0.7 per cent).
Markets in Asia remained mostly bullish as China continue to lead by climbing to multi-year highs. Singapore’s Straits Times Index increased 2.2 per cent to 3,353.68 points, the highest in nearly five months. Shanghai Stock Exchange Composite Index rose 1.5 per cent in a week to its four-year high at 3,157.72 points. Japan’s Nikkei 225 increased 1.1 per cent in a week to 17,818.96 points. Hong Kong’s Hang Seng Index rose one per cent to 23,349.34 points last Wednesday. Hong Kong was on holiday on Thursday and Friday.
Wall Street continued to climb to all time highs while Europe markets remained bullish. On Wednesday, the US Dow Jones Industrial Average rose 2.5 per cent from the previous Thursday to 18,030.21, a record close.
London’s FTSE100 Index increased two per cent to 6,609.93. Germany’s DAX Index rose 1.1 per cent to 9,922.11 points last Tuesday. The US dollar gained strength against major currencies as the US dollar index rose to its eight-and-a-half years high at 90.22 points. However, the Malaysian was slightly weaker against the US dollar at RM3.49 per US dollar from RM3.47 a week before.
Stronger US dollar continued to put pressure on gold prices while crude oil prices found support. COMEX gold declined 2.1 per cent in a week to US$1,173,5 an ounce. NYMEX WTI crude oil slightly rebounded and increased 1.3 per cent in a week to US$55.85 per barrel. Crude palm oil futures in Bursa Malaysia increased 3.6 per cent to RM2,249 per metric tonne.
The FBM KLCI is still below the short term 30-day moving average at 1,770 points and the long term 200-day moving average at 1,843 points. Both these moving averages are declining.
This indicates that the trend is still bearish. Furthermore, the index is also below the Ichimoku Cloud indicator. However, the Cloud is narrow and this indicates that the index can be volatile and can easily change direction. The Cloud remains narrow in the next two weeks.
Momentum indicators are starting to turn upwards and this indicates that the momentum or sentiment has turned bullish. The RSI indicator has rebounded and is now near its mid-level and the MACD indicator has crossed above its trigger line. However, the increase in the past one week with low volume indicates that the sentiment is still uncertain.
The bullish momentum last week may continue this week but there may be resistance and hence would probably be a subdued bullish week. The market may face resistance when the index approaches the short term 30-day moving average. Therefore, the index not out of the bearish trend unless it can break and stay above 1,760 points.
With only a few days before the new year, we expect the market to be quiet but blue-chip stocks, especially plantation companies continue to be window-dressed.
With Bursa Malaysia ending on a bearish note this year, let’s aim for a better year 2015 by having sound investment and trading strategies. Here’s wishing you all a Happy New Year 2015.
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.