Bears still in control

The market started on a bullish note last week but pulled back on lack of confidence as markets performances in the region were mixed. The benchmark FBM KLCI fell 0.3 per cent in a week to 1,740.93 points last Friday. I mentioned last week that the index is set to test the immediate resistance level at 1,750 points last week but seemed struggling to overcome this level despite testing it for three days.

Trading volume has increased last week and this indicates increasing selling pressure as the index fell. The average daily trading volume increased to 3.1 billion shares from 2.7 billion shares two weeks ago. However, the average daily trading value was firm at RM2.4 billion. This indicates lower-priced counters were the focus and these counters are normally traded by the retail market participants.

Institutional market participants, both local and foreign, were net sellers last week. Net sells from local and foreign institutions were RM67 million and RM29 million respectively. Net buy from local retail was therefore RM96 million.

In the FBM KLCI, decliners thumped gainers. CIMB and Telcos helped support the index. The top gainers for the week were CIMB Group Holdings Bhd (2.3 per cent in a week to RM6.21), Maxis Bhd (1.9 per cent to RM6.00) and Axiata Group Bhd (1.7 per cent to RM5.43). The top decliners were British American Tobacco (M) Bhd (6.8 per cent to RM37.76), YTL Corporation Bhd (-3.9 per cent to RM1.24) and Genting Bhd (3.6 per cent to RM8.91).

Markets in Asia, ex-Japan, ended up mixed but US and European markets continued to soar. Japan’s Nikkei 225 Index jumped 2.4 per cent in a week to fresh historical high. Major markets in Europe including Germany, France and UK climbed to historical highs last week. The US Dow Jones industrial Average also recorded a fresh historical high.

US dollar was firm last week. The US dollar index was unchanged at 94.9 points last Friday. The Malaysian ringgit marginally strengthened against the US dollar, from RM4.24 to RM4.23 to a US dollar.

On commodities, price of crude oil continued to increase on OPECs determination to lower oil output. However, gold (COMEX) was directionless last week and eventually fell 0.3 per cent in a week to US$ 1,270.20 an ounce last Friday. Crude oil (Brent) increased 2.6 per cent to US$62.09 per barrel, a 28-month high. Locally, crude palm oil futures declined 0.5 per cent in a week to RM2,804 per metric tonne on profit taking after a strong rally two weeks ago.

The FBM KLCI continued to buck the global markets performances bullish trend. The market is still bearish as the index failed to climb above the immediate resistance level at 1,750 points. The index tested this level three times in the past one week and this indicates that the resistance is strong. As we have mentioned in our previous articles, Sellers may be attracted to sell when the index rebounds to this resistance level.

The failure to overcome the resistance level indicates that the FBM KLCI is technically. The index is short term 30-day moving average and the Ichimoku Cloud indicator. Furthermore, the Ichimoku Cloud is seen expanding downwards. Also, the index also failed to climb above the long term 200-day moving average and continues to stay below it.

The bearish momentum is gaining traction last week after a rebound two weeks ago. The RSI and Momentum Oscillator indicators were declining and the index is trading near the bottom bands of the Bollinger Bands indicator. Furthermore, the MACD indicator is declining and below its moving average.

Instead of staging a rebound, the performance of the FBM KLCI in the past one week indicates that the market sentiment is still bearish. Despite generally bullish markets performances globally, the market confidence was still weak. This also indicates that the bears are still in control.

The chart shows that the index is set to trend lower towards the next support level between 1,700 and 1,710 points as long as it stays below the immediate resistance level at 1,750 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.

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