In my previous article, I have mentioned that the market may remain slightly bullish as market players continue to be cautious in a somewhat bullish sentiment. The stronger ringgit helped support the market on a background of mixed corporate earnings.
Performances in the global markets were also mixed and this did not help boost market confidence. The FBM KLCI increased only 0.3 per cent in a week to 1,835.66 points after trading in a narrow range between 1,822.55 and 1,836.14 points. The close near the week high shows that the market remains slightly bullish.
Trading volume has eased last week. The average trading volume was 2.7 billion shares as compared to 3.2 billion shares two weeks ago. Average trading value was RM2.2 billion and this indicates most of the trading volume was still on penny stocks.
From Monday to Thursday last week, net sellers in Bursa Malaysia were foreign institutions at 122.9 million and local retail were net buyers at 102.0 million while the balance was from local institutions.
The lack of buying from local institutions shows that the support has weakened. In the FBM KLCI, gainers beat decliners two to one and were led by RHBCAP (5.1 per cent), ASTRO (4.3 per cent) and TM (2.7 per cent) and decliners were led by IOIPG (2.6 per cent), GENTING (2.5 per cent) and PPB (1.6 per cent).
Regional indices
Markets were mixed on lack of news and catalysts. Singapore’s Straits Times Index was almost unchanged in a week at 3,105.95 points. Hong Kong’s Hang Seng Index increased 1.2 per cent to 22,836.96 points but China’s Shanghai Stock Exchange Composite Index declined 2.7 per cent to 2,056.30 points. Japan’s Nikkei 225 Index declined only 0.2 per cent in a week to 14,841.07 points.
On Thursday, the US Dow Jones Industrial Average rose 0.9 per cent in a week to 16,272.65 points, the highest in a month. London’s FTSE100 Index was almost unchanged in a week at 6,810.27 points after pulling back from a 14-year high last Monday at 6,865.86 points. Germany’s DAX Index declined only 0.3 per cent to 9,588.33 points.
Commodities
Price of commodities started to move into a sideways correction after a month of increases. COMEX gold rose 0.6 per cent in a week to US$1,330.80 an ounce. NYMEX crude oil was almost unchanged at US$102.07 per barrel. The US Dollar Index was firm in a week at 80.23 points.
The Malaysian ringgit slightly strengthened against the US dollar from RM3.29 per US dollar two weeks ago to RM3.28. Crude palm oil futures continued to rally, rising 1.6 per cent in a week to RM2,800 per metric tonne.
The FBM KLCI remained bullish but is struggling to climb higher. The index is above short term the 30-day moving average but this average is flat. The FBM KLCI has climbed above the Ichimoku Cloud and this indicates that the prospect of the index climbing higher is bright.
However, FBM KLCI is still below the 61.8 per cent Fibonacci retracement level at 1,840 points from the down trend since January. In Fibonacci analysis, the trend is reversed once this last important retracement level is broken. Till then, the FBMKLCI is still in a downward trend correction.
The sideways movement in the past two weeks caused momentum indicators to indicate a weak trend. The RSI remained flat near the mid-level and the Momentum Oscillator pulled back to near its middle level. The MACD indicator is still increasing but the momentum is getting weaker as it converges against its moving average. Furthermore, the FBMK LCI is moving away from the top band of the Bollinger Bands indicator but still above the middle level or 20-day moving average. These indicators continue to indicate that the index is still in a correction.
There were not much changes to the technical indicators readings as compared to the previous week. The mixed market performance globally does not help to set market trend. However, if the ringgit continues to strengthen, this would help boost some market confidence. We can also see that the foreign institution selling has eased.
Although they were the net sellers throughout last week, they were net buyers last Thursday. We continue to expect the market to be cautiously bullish and the index may test the 1,840 points resistance level this week.
A breakout above this resistance level could see the market climbing to record highs in the near term.
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.