A risky pullback Saturday, 8 November 2014 By: K.M. LEE

by **Cals** Sun 09 Nov 2014, 23:46

A risky pullback

Saturday, 8 November 2014
By: K.M. LEE

REVIEW: Overnight Wall Street finished broadly higher, with the closely-watched Dow Jones Industrial Average and the S & P 500-share jumping 1.13% to 17,390.52 and 1.17% to 2,018.05 respectively, a record close amid better-than-expected corporate earnings result.
The surprised jolt from the Bank of Japan (BoJ) ramping up its massive economic stimulus programme added to the upbeat mood.
Taking the cue from a steadier US equities, Bursa Malaysia kicked off the week on a solid platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) adding 1.67 points to 1,856.82, extending the previous session’s gains on follow-through buying momentum.
The second and lower liners were actively traded while blue chips led the winners’ board amid support from big funds.
However, the momentum could not be sustained, as a futile attempt to clear the uppermost 100-day simple moving average of 1,860 points prompted investors to lock in recent gains.
Meanwhile, shares across Asia, except for Japan, which paused for consolidation, also were not supportive of the local bourse.
In the wake of profit-taking selling, the key index succumbed to pressure to retreat from an intra-day peak of 1,858.09 in the morning to touch a low of 1,848.25 in the afternoon session before a late bout of bargain hunting interest helped trim losses.
At the final bell, the FBM KLCI eased only a minor 1.81 points to 1,853.34 on Monday.
After a strong rally, the bulls on Wall Street opted to pause for a breather the next day, which saw the overnight Dow dropping a small 24.28 points to 17,366.24.
In the Asia-Pacific region, most markets dipped, as a disappointing China data dampened sentiment, although the Nikkei 225-share average bucked the trend on extended buying momentum, generated by the recent BoJ’s monetary easing programme.
Given the dearth of fresh market-stimulating leads on the horizon to boost buying, the local bourse drifted lower due to lack of support, ending down 5.98 points to 1,847.36 on Tuesday and losing another 8.07 points to 1,839.29 on extended consolidation, very much mirroring the offshore trend in mid-week.
In another sluggish session, the FBM KLCI flirted between an intra-day high and low of 1,844.44 and 1,830.21 throughout before closing down 7.31 points to 1,831.98 on Thursday, ignoring a rally in Wall Street.
And yesterday, despite the Dow setting record for the second straight session, the local bourse declined a further 7.79 points to 1,824.19, as persistent profit-taking in the blue chips dominated the floor.
Statistics: Week-on-week basis, the principal index slumped 30.96 points, or 1.7% to 1,824.19 yesterday, versus 1,855.15 on Oct 31.
Total turnover for the week stood at 11.201 billion shares valued at RM10.532bil, compared with 10.517 billion units worth RM10.31bil done the prior week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were fast reaching the oversold area. It had triggered a short-term sell at the top a week ago.
Though the daily moving average convergence/divergence (MACD) histogram still flirting above the daily signal line to retain the buy call, it had indicated a negative divergence.
The past week saw the 14-day relative strength index retracing from a reading of 76 on Monday to a low of 49 on Thursday before ticking up slightly to settle at the 52-point level yesterday.
Weekly indicators were little changed, with the slow-stochsatic momentum index sustaining the upward thrust but the MACD keeping the sell signal.
Outlook: The local bourse slipped into correction mode the past week owing to an apparent profit-taking activity, as investors opted to book gains following the recent steep rally.
It was a big disappointment, as we felt that the bulls should have taken advantage of the strength in Wall Street to push the FBM KLCI to a safer ground.
Anyway, the market is now in a dangerous position following the pullback, with the key index lingering below the 100-day, 200-day, 50-day and the 14-day simple moving average (SMA) lines.
Going forward, the market must rebound quickly from the current level. Otherwise, a crack of the lower 21-day SMA of 1,818 points will probably lead to a re-test of the recent lows of 1,766.22, of which a clear breakdown would signal the continuation of a downtrend, thus opening the windows for a probable long bear phase.
Based on the daily chart, a “golden crossing” was sighted earlier of the week, but the overall landscape will only turn overwhelmingly bullish once the 1,860-point heavy barrier is removed.
If successful, the next objective would be to challenge the 1,880-point hurdle or a re-test of the historical peak of 1,896.23 or to explore the 1,900 unknown territory.
Technically, indicators are pretty tricky. suggesting range-bound trading until a clearer picture emerges.