The market started on a bullish note last week but pulled back on Friday after the US Federal Reserve increased key interest rates to a highest level in a decade at 1.75 per cent. This caused Wall Street to fall sharply at the end of the week and this has shaken markets globally including Malaysia.
However, Bursa Malaysia bucked the bearish global trend and this shows that the market was shaken by the US Federal Reserve, but not stirred. The FBM KLCI increased one per cent in a week to 1,865.22 points last Friday.
Trading volume fell last week as the market is getting a little more cautious over important events like the US Federal Reserve monetary policy meeting. The average daily trading volume was 2.2 billion shares as compared to 2.6 billion shares two weeks ago. The average daily trading value fell to RM2.2 billion from RM2.8 billion.
Foreign institutions remained as net buyers last week. Net buy from foreign institutions was RM447 million while net sells from local institution and retails were 381 million and RM66 million.
Despite the gain in the FBM KLCI, decliners out-paced gainers five to four last week in the FBM KLCI component. The top gainers for the week were Nestle (M) Bhd (14.5 per cent in a week to RM150), IOI Corporation Bhd (4.4 per cent to RM4.78) and Public Bank Bhd (4.3 per cent to RM24). The top decliners were KLCC Properties and REITS – Stapled Securities Bhd (9.5 per cent to RM6.88), Astro Malaysia Holdings Bhd (6.8 per cent to RM2.18) and Sime Darby Bhd (5.6 per cent to RM2.55).
Global markets were bearish. In Asia, Japan’s Nikkei 225 fell to its lowest level in a year while most of the others fell to a month low. In Europe, Germany’s DAX fell 4.4 per cent in a week to its lowest in a year while UK’s FTSE fell 3.5 per cent to its lowest in 15 months. The US Dow Jones Industrial Average fell 5.7 per cent in a week to its lowest level in four months.
The US dollar weakened last week despite the US interest rate hike. The US dollar Index weakened to 89.5 points last Friday as compared to the previous week at 90.2 points. The Malaysian ringgit slightly weakened against the US dollar at RM3.92 last Friday as compared to RM3.91 the previous week.
Commodities prices were bullish last week. Gold (COMEX futures) increased 2.5 per cent in a week to US$1,347.30 an ounce last Friday. Brent crude oil futures jumped 6.6 per cent to close at US$70.36 per barrel, the highest in two months. In the local market, crude palm oil increased only 0.3 per cent in a week to close at RM2,426 per metric tonne.
The FBMKCLI sideways trading range was between 1,830 points and 1,870 points. The FBM KLCI is currently testing the resistance level at 1,870 points and this basically indicates a bullish sentiment. However, the FBM KLCI failed to breakout as sentiment was weakened by the Global markets performances.
Technically, the FBM KLCI bullish above the short and long term 30 and 200 day moving averages.
Furthermore, the index is above the rising and wide Ichimoku Cloud indicator. This indicates that the bullish trend has good support.
Also, momentum indicators like the RSI and Momentum Oscillator are beginning to climb higher and this indicates that the bullish trend is gaining traction. Furthermore, the MACD indicator has crossed above its moving average and the index is trading at the top band of the Bollinger Bands indicator. These are also indications of a strengthening bullish momentum.
From last week’s performance, the index is expected to trend higher especially if it can break above the immediate resistance level at 1,870 points. A breakout of this level indicates strong market confidence and the index may climb to the next resistance level at 1,925 points based on the triangle chart pattern price target.
However, if the index fails to climb above 1,870 points, it may pull back to the support level of the sideways trading range at 1,830 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.