Thursday, April 9

Bearish signs on the FBM KLCI chart


Daily FBM KLCI chart as at July 12, 2019

The market pulled back to a three-week low last week after climbing to its highest in four months about two weeks ago.

The local market performance was in line with most of the markets globally except for the US market which climbed to a historical high. This indicates weak market confidence and the FBM KLCI remained in the red year-to-date while other markets are in the black.

The FBM KLCI declined 0.8 per cent in a week to 1,669.45 points last Friday.

Trading activity was lower last week as compared to the previous week. The average daily trading volume has declined to 2.7 billion shares last week from 3.0 billion shares the week before. The average daily trading value fell to RM2.0 billion from RM2.1 billion.

Stronger Ringgit encouraged foreign buying last week. Net buy from foreign institutions was RM84.9 million. Local retail joined the foreign institutions with a net buy of RM84.6 million. Therefore, net sell from local institutions was RM169.5 million.

In the FBM KLCI, decliners beat gainers 11 to 4. The top three gainers were Press Metal Aluminium Holdings Bhd (+1.6 per cent in a week to RM4.39), Dialog Group Bhd (+0.9 per cent to RM3.38) and PPB Group Bhd (+0.9 per cent to RM18.74).

The top three decliners were Petronas Dagangan Bhd (-3.3 per cent to RM24.76), CIMB Group Holdings Bhd (-3.2 per cent to RM5.20) and Genting Bhd (-2.7 per cent to RM6.62).

Markets generally closed lower last week with the exception of the US market. The US Dow Jones Industrial Average and the S&P500 index rose to historical highs.

The US Dollar has slightly weakened against major currencies. The US Dollar Index slightly declined to 96.7 points from 97.2 points two weeks ago. The Malaysian Ringgit strengthened to RM4.11 last Friday from RM4.13 two weeks ago.

Prices of commodities closed higher. Crude oil (Brent) increased 4.0 per cent in a week to US$67.00 a barrel last Friday, the highest since end May. Gold rose on weaker US Dollar. COMEX Gold increased 1.2 per cent to US$1,417.80 an ounce. However, crude palm oil (BMD) fell 0.7 per cent in a week to RM1,944 per metric ton, the lowest in nearly 4 years.

The FBM KLCI fell below the immediate support level at 1,670 points last week and the next support level is at 1,657 points.

The index failed to test the 1,700 points psychological resistance level two weeks after it climbed above the long term 200-day moving average at 1,685 points. This indicates a weak market sentiment.

Technically, the FBM KLCI trend remained bullish in the short term above the short term 30-day moving average. However, there are signs of weaknesses in the bullish trend as the index fell below the short term up trend line and is now near the 30-day moving average.

Furthermore, the index is now above a thin Ichimoku Cloud indicator and this indicates weak support in the up trend.

Momentum indicators continued to decline and this indicates that the bearish momentum is gaining traction. The RSI and Momentum Oscillator indicators are declining and are near their mid-levels. Furthermore, the MACD has fallen below its moving average.

The technical indicators in the chart show signs of weakness in the bullish trend. Last week’s decline was an indication of a weak market sentiment despite expectations of the FBM KLCI testing the psychological 1,700 points.

Henceforth, we expect further declines for the index and may test the support level at 1,657 points and if the index is not supported at this level, further downward correction is expected. The next technical support level is at 1,640 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 investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.

Global markets indices and commodities performances as at July 12, 2019