Wednesday, July 17

Market remains bearish


Global markets indices and commodities performances as at December 7.

Daily FBM KLCI chart as at December 7, 2018.

The FBM KLCI rebounded in the earlier part of the week but pulled back to settle almost unchanged in a week. Markets performances globally were bearish last week led by the US market.

Furthermore, the ringgit got weaker towards the end of last week.

However, the index was supported by telecommunication companies. The benchmark FBM KLCI closed firm at 1,680.54 points last Friday from the previous week.

Trading volume has fallen last week and this indicates that the market is being more cautious.

The average daily trading volume has declined to 2.3 billion from 2.8 billion shares in the previous week and the average daily trading value fell to RM2.1 billion from RM3.6 billion.

Market participation were mixed. Local institutions were net sellers.

Net sell from local institutions was RM34.2 million while net buys from local retail and foreign institutions were RM34.2 million and RM2.9 million respectively.

In the FBM KLCI, gainers outpaced decliners eight to seven. The top gainers were Telekom Malaysia Bhd (12 per cent in a week to RM2.61), Axiata Group Bhd (6.9 per cent in a week to RM3.88) and Bhd (5.9 per cent to RM4.49).

The top three decliners were Tenaga Nasional Bhd (3.8 per cent to RM13.70), PPB Group Bhd (3.4 per cent to RM17) and Nestle (M) Bhd (3.3 per cent to RM144.50).

Markets closed generally lower except for China. In Asia, the decline was led by Japan Nikkei 225 index which fell three per cent in a week.

In Europe, Germany’s DAX and UK’s FTSE100 index fell to a two-year low.

The US Dow Jones Industrial Average fell 4.5 per cent in a week.

US dollar weakened against major currencies. The US dollar index rose to 96.7 points last Friday from 97.3 points the week before.

The Malaysian ringgit continued to strengthen against the green back at RM4.16 to a US dollar as compared to RM4.18 in the previous week.

Crude oil (Brent Crude) snapped an eight-week decline and rebounded last week as OPEC cuts production.

The price rose 4.6 per cent in a week to US$61.40 per barrel last Friday. Gold (COMEX) increased 2.3 per cent from the previous week at US$1,254.00 an ounce.

Locally, crude palm oil (BMD) fell two per cent to RM1,998 last Friday.

The FBM KLCI is testing the immediate support level at 1,670 points after failing to rebound and test the resistance at 1,720 points and also the short term 30-day moving average.

This indicates that the market sentiment is still bearish.

Chart-wise, the FBM KLCI trend remained bearish below the short term 30-day moving average and the long term 200-day moving average.

Furthermore, the index stays below the Ichimoku Cloud indicator. The expanding Cloud indicator downwards indicates that the bearish momentum is gaining traction.

The RSI and Momentum Oscillator failed to climb above their mid-levels and this indicates that the market still faced resistance. These indicators are starting to decline and this indicates that the bearish momentum is gaining some traction. Furthermore, the MACD is almost falling below its trigger line.

The FBM KLCI remained within the support (1,670 points) and resistance level (1,720 points) of the triangle chart pattern.

A breakout above the resistance level (1,720 points) indicates that the market is ready for a technical rebound but a breakout below the support level (1,670 points) could mean continuation of the bearish trend.

However, the technical indicators on the chart favours a breakout of the support line and if this happens, the index may fall to the triangle pattern’s target at 1,610 points.

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.