Correction looms Saturday, 1 November 2014 By: K.M. LEE

by **Cals** Sun 02 Nov 2014, 22:58

Correction looms

Saturday, 1 November 2014
By: K.M. LEE

REVIEW: As expected, Bursa Malaysia started out the new week on a solid platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) rising 2.96 points to 1,821.82 in early deals amid follow-through buying.
Though there was a slight hiccup soon after, profit-taking was well absorbed by the market.
Meanwhile, blue chips led the winners board. Elsewhere, second and lower liners also were actively traded, as upbeat economic data and stronger-than-expected corporate earnings in the United States helped boost risk appetite.

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A good showing in major markets in the Asia-Pacific region added to the positive tone. Against the positive backdrop, the key index chalked up 4.29 points to 1,823.15 in robust volumes on Monday.
Then, overnight Wall Street eked out a small gain, as disappointing data showing the pace of growth in the US services sector slowed in October to a six-month low sapped buying sentiment.
In the absence of clear direction from the United States, Asian shares wobbled in early session the next day, but later turned mixed, as caution grew ahead of a policy meeting by the Federal Reserve.
Tracking the sluggish overseas tone, the local bourse declined in the morning on consolidation, but a bout of late buying in select blue chips helped sent the market to finish firmer.
Despite the positive close, the overall market breadth was negative, with decliners beating advancers by 529 to 284 on Tuesday. Nevertheless, after a short breather, global markets bounced back to life, led by the Dow soaring more than 1%, as growing confidence about the world economy fuelled renewed buying.
In line with overseas trend, the FBM KLCI rose in the morning session to finish at the day’s high of 1,839.55, up 13.87 points in mid-week.
Thereafter, continuous bargain hunting alternated with profit-taking dominated the floor after the US Federal Reserve laced its economic assessment with a tinge of optimism despite ending its quantitative easing programme, which was widely expected.
As usual, gains in the quality issues lifted the key index up 3.23 points to 1,842.78 in a generally range-bound session on Thursday and an extra 12.37 points to 1,855.15 yesterday.

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Statistics: On a Friday-to-Friday basis, the major index climbed 36.29 points, or 1% to 1,855.15 yesterday, against 1,818.86 on Oct 24. Weekly turnover amounted to 10.517 billion units valued at RM10.311bil, compared with 6.765 billion shares worth at RM7.375bil changed hands during the four-day holiday-curtailed previous week.
Technical indicators: The oscillator per cent K tripped below the oscillator per cent D to trigger a short-term sell deep in the overbought area yesterday, but it could not be confirmed, simply because the two lines were still flirting at the bullish area.
Elsewhere, the 14-day relative strength index extended the upward momentum from a single-digit reading of nine to settle at the 71 points level yesterday.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram continued to expand positively against the daily signal line to stay bullish. It had issued a buy a week ago.
Weekly indicators improved further, with the slow-stochastic momentum index climbing higher after calling for a buy previously and the MACD showing a mild convergence pictogram despite keeping the sell signal.
Outlook: The local bourse recovered further, as a rally in global equities, especially Wall Street, underpinned by upbeat economic data and corporate earnings report helped fan extended bargain hunting interest the past week. Obviously, Bursa is tracking its offshore peers and should overseas sentiment continues to get better, investors can expect the bulls to gain more grounds on follow-through support.
Apparently, the landscape has improved slightly. While all the recent “death crosses” on our radar screen remained intact, the strong convergence pictogram on the 14-day simple moving average (SMA) line indicates that the market has bottomed out.
However, the bulls most show more consistency going forward. Otherwise, the FBM KLCI may test the uppermost 100-day SMA of 1,860, only to be followed by a significant pullback on correction and based on the daily chart. If that happens, the local bourse would be in greater danger of developing a long bear phase.
Technically, the daily MACD is bullish, but given the growing overbought condition, we reckon the market will undergoes some sort of consolidation this week.
Initial support is seen at the 1,830-1,833-point range, followed by the 21-day SMA of 1,817 and the next, at the 14-day SMA of 1,810 points. The recent ebb of 1,766.22 remains the tentative base for the current upward wave.
To the upside, a breach of the 1,860-point barrier would propel the key index up to the 1,880 points. The next objective would be to challenge the historical peak of 1,896.23 or the 1,900-point psychological level.