With the lack of news to spur market confidence, the market pulled back last week as it was at the short-term overbought zone in a sideways trend. Last week, I mentioned that the market is expected to continue sideways with a bearish bias. The FBM KLCI is now at the support level of this short-term sideway trend.
Since last week, the KLCI declined 1% to 1,465.39 points with a trading range between 1,456.71 and 1,482.99 points. Trading volume increased from a daily average of 1.7 billion shares compared with two billion shares two weeks ago.
Markets in the US and Europe were in a selling pressure as investors are worried about the prolonged eurozone crisis and possible downgrading of a few more European banks.
Recently, Standard & Poor’s cautioned that there may be more downgrades in the eurozone and Moody’s rating agency put eight Spanish banks on review for possible downgrade. The possible downgrades put pressure in the equity markets.
Global markets were mixed with a bearish tone especially in Europe. US Dow Jones Industrial Average declined only 0.5% in a week to 12,021.39 points on Monday after a strong rally two weeks ago. Also on Monday, London’s FTSE 100 index fell 2.5% in a week and Germany’s DAX plunged 5.2% to 5,785.43 points.
The European markets put pressure on the Asian markets as well. Yesterday, Hong Kong’s Hang Seng Index fell 2.6% in a week to 18,447.17 points while Japan’s Nikkei 225 index remains near the same level as the previous week at 8,552.81 points. Singapore’s Straits Times Index shed 2.3% to 2,685.74 points.
The US dollar gained strength last week with a strong rebound yesterday and put pressure on the ringgit and prices of commodities. The weakening commodities prices were also caused by the gloomy outlook of the global economy. The ringgit is currently at 3.178 against the dollar compared with 3.13 a week ago.
Crude oil on NYMEX fell to US$98 (RM311.60) per barrel after trading above US$100 two weeks ago. Price of gold in COMEX declined 3.4% in a week to US$1,664.10 an ounce. The price of crude palm oil (CPO) in Bursa Malaysia continues to decline after a rebound two weeks ago. The price of CPO futures declined 2.7% to RM3,002 per tonne.
After climbing above the moving averages two weeks ago, the KLCI is not back at the short- to long-erm 30- to 90-day moving averages range. The moving averages are diverging against one another and started to become flat. This basically indicates that the market is still in a sideway trend. The averages range between 1,440 and 1,468 points.
The Ichimoku Cloud indicator still indicate steady support and still bullish. The cloud range, which acts as the support level for the KLCI, is currently between 1,400 and 1,440 points. However, the extended cloud, which is plotted 26 days ahead, is getting a little thinner. The width of the cloud indicates the support strength in the uptrend and the wider the cloud, the stronger it is.
Momentum indicators are back at their neutral zone after being slightly bullish two weeks ago. The MACD, RSI and Momentum Oscillators are back at their middle levels. The longer term pattern shows a bearish divergence and this indicate strong resistance.
The Bollinger Bands, which were expanding two weeks ago, started to contract last week and move sideways and the KLCI is currently at the middle band. The indicator basically indicates that the KLCI is in a short-term correction.
Two weeks before the year ends and the anticipated window dressing, although there is a strong rally since October, may not be what most investors are expecting and that is the KLCI closing above 1,500 points.
The divergence in the momentum indicators and gloomy economic outlook strengthens the 1,500-point resistance level. Therefore, there is a low change of the index moving above 1,500 points this year. Even if the index is able to climb above this level, the sustainability is questionable.
This week, I am expecting the market to rebound as the index is near the immediate support level at 1,460 points. Immediate resistance in this sideway trend is 1,480 points with a stronger resistance level at 1,500 points. With the current technical readings, expect market to continue trading sideways.
There may be no stocks worth mentioning at this moment but there is this one stock that started to move strongly yesterday with high volume on speculative play.
Water treatment company Envair Holding Bhd’s share price rose 25.5% yesterday on higher than average volume. The strong price volume breakout may follow through in the next few days with a technical price target of 39.5 sen to 40 sen.
The stock closed at 32 sen yesterday. As this would be speculative, a tight stop of 30 sen immediate support level should be in place, if you decide to trade this stock.
Since last week, the KLCI declined 1% to 1,465.39 points with a trading range between 1,456.71 and 1,482.99 points. Trading volume increased from a daily average of 1.7 billion shares compared with two billion shares two weeks ago.
Markets in the US and Europe were in a selling pressure as investors are worried about the prolonged eurozone crisis and possible downgrading of a few more European banks.
Recently, Standard & Poor’s cautioned that there may be more downgrades in the eurozone and Moody’s rating agency put eight Spanish banks on review for possible downgrade. The possible downgrades put pressure in the equity markets.
Global markets were mixed with a bearish tone especially in Europe. US Dow Jones Industrial Average declined only 0.5% in a week to 12,021.39 points on Monday after a strong rally two weeks ago. Also on Monday, London’s FTSE 100 index fell 2.5% in a week and Germany’s DAX plunged 5.2% to 5,785.43 points.
The European markets put pressure on the Asian markets as well. Yesterday, Hong Kong’s Hang Seng Index fell 2.6% in a week to 18,447.17 points while Japan’s Nikkei 225 index remains near the same level as the previous week at 8,552.81 points. Singapore’s Straits Times Index shed 2.3% to 2,685.74 points.
The US dollar gained strength last week with a strong rebound yesterday and put pressure on the ringgit and prices of commodities. The weakening commodities prices were also caused by the gloomy outlook of the global economy. The ringgit is currently at 3.178 against the dollar compared with 3.13 a week ago.
Crude oil on NYMEX fell to US$98 (RM311.60) per barrel after trading above US$100 two weeks ago. Price of gold in COMEX declined 3.4% in a week to US$1,664.10 an ounce. The price of crude palm oil (CPO) in Bursa Malaysia continues to decline after a rebound two weeks ago. The price of CPO futures declined 2.7% to RM3,002 per tonne.
After climbing above the moving averages two weeks ago, the KLCI is not back at the short- to long-erm 30- to 90-day moving averages range. The moving averages are diverging against one another and started to become flat. This basically indicates that the market is still in a sideway trend. The averages range between 1,440 and 1,468 points.
The Ichimoku Cloud indicator still indicate steady support and still bullish. The cloud range, which acts as the support level for the KLCI, is currently between 1,400 and 1,440 points. However, the extended cloud, which is plotted 26 days ahead, is getting a little thinner. The width of the cloud indicates the support strength in the uptrend and the wider the cloud, the stronger it is.
Momentum indicators are back at their neutral zone after being slightly bullish two weeks ago. The MACD, RSI and Momentum Oscillators are back at their middle levels. The longer term pattern shows a bearish divergence and this indicate strong resistance.
The Bollinger Bands, which were expanding two weeks ago, started to contract last week and move sideways and the KLCI is currently at the middle band. The indicator basically indicates that the KLCI is in a short-term correction.
Two weeks before the year ends and the anticipated window dressing, although there is a strong rally since October, may not be what most investors are expecting and that is the KLCI closing above 1,500 points.
The divergence in the momentum indicators and gloomy economic outlook strengthens the 1,500-point resistance level. Therefore, there is a low change of the index moving above 1,500 points this year. Even if the index is able to climb above this level, the sustainability is questionable.
This week, I am expecting the market to rebound as the index is near the immediate support level at 1,460 points. Immediate resistance in this sideway trend is 1,480 points with a stronger resistance level at 1,500 points. With the current technical readings, expect market to continue trading sideways.
There may be no stocks worth mentioning at this moment but there is this one stock that started to move strongly yesterday with high volume on speculative play.
Water treatment company Envair Holding Bhd’s share price rose 25.5% yesterday on higher than average volume. The strong price volume breakout may follow through in the next few days with a technical price target of 39.5 sen to 40 sen.
The stock closed at 32 sen yesterday. As this would be speculative, a tight stop of 30 sen immediate support level should be in place, if you decide to trade this stock.
