The market pulled back for a correction last week just after it closed at a historical high two weeks ago. Weaker ringgit has dampened market sentiment. Furthermore, the market was also cautious as the 14th General Election approaches in less than two weeks. The FBM KLCI fell 1.3 per cent in a week to 1,863.47 points last Friday.
Trading activity continued to weakened last week. The average daily trading volume shrank to 1.9 billion shares from 2.6 billion two weeks ago.
The average daily trading value fell to RM2.2 billion from RM2.4 billion. This indicates that the market is being more cautious.
Market participation was mixed and local institutions were net sellers. Net sell from local institutions was RM76 million while net buys from local retail and foreign institutions were RM51 million and RM25 million respectively.
In the FBM KLCI, decliners beat gainers three to one last week. The top gainers for the week were Digi.com Bhd (2.2 per cent to RM4.63), PPB Group Bhd (1.2 per cent to RM19.24) and KLCC Real Estate Investment Trust Bhd (0.5 per cent to RM7.39). The top decliners were Sime Darby Bhd (8.2 per cent to RM2.57), Nestle (M) Bhd (6.5 per cent to RM138.40) and Press Metal Aluminium Holdings Bhd (6.1 per cent to RM4.80).
Global markets performances were mixed last week. In Asia, Malaysia and Hong Kong markets fell while Singapore, China and Japan markets closed higher. The US market fell but European markets closed mostly higher.
The US dollar continued to strengthen against major currencies. The US dollar Index increased to 91.5 points last Friday from 90.3 points the week before.
The Malaysian ringgit has weakened against the US dollar despite the weaker US dollar index. The ringgit was RM3.92 to a US dollar last Friday against RM3.90 the week before.
In commodities, crude oil (Brent) rose one per cent in a week to US$74.44 a barrel. Gold (COMEX) fell one per cent in a week to US$1,324.10 an ounce. In the local market, crude palm oil futures fell 1.4 per cent to RM2,381 per metric tonne.
The FBM KLCI fell below the immediate support level at 1,875 points last week. This indicates a weak bullish momentum despite the index rising to historical high two weeks ago.
However, the index rebounded from the 61.8 per cent Fibonacci retracement level of the bullish rally that started in early April at 1,844 points.
The 61.8 per cent retracement is usually the last support level for a bullish rally.
Technically, the trend is bearish in the short term but in the intermediate term of three months, the index is basically directionless.
The FBM KLCI has been whipsawing against the 30-day moving average in the past three months. However, in the longer term, the index remained bullish above the 200-day moving average and the Ichimoku Cloud indicator.
The support level for the long term bullish trend is at 1,800 points.
Momentum indicators indicates a bearish bias for the index. The momentum gained in the last three weeks was subdued by the decline last week.
The RSI and Momentum Oscillator indicators have pulled back to their mid-levels and the MACD indicator is below its moving average. Furthermore, the FBM KLCI has pulled back to the mid-band of the Bollinger Bands indicator.
The market seems technically bullish until the pull back last week. Technically, the market is expected to remain bullish if it can stay above 1,844 points in the short term.
If this level can’t hold, the index may test the longer-term support level at 1,800 points.
In the next one or two weeks, we expect the market to trend sideways with a bearish bias towards the General Elections on May 9.
The FBM KLCI is expected to trade between the immediate support level at 1,844 points and resistance at 1,880 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.