Market turns sideways By: K.M. LEE . . . MARKET TREND

by **Cals** Sun 06 Sep 2015, 23:08

Market turns sideways
Saturday, 5 September 2015
By: K.M. LEE . . . MARKET TREND

REVIEW: Bursa Malaysia kicked off September with a bang on Tuesday, with the BM Kuala Lumpur Composite Index (FBM KLCI) jumping a huge 42.73 points to 1,655.47 at the opening bell, extending the previous week’s 2.4% rally amid continuous bargain hunting interest, as the massive protest over the weekend was passed without any untoward incidents.
The local bourse was shut on Monday due to a public holiday.
A steep advance in crude oil prices and the appreciation of the Malaysian ringgit against the greenback added to the upbeat mood.
However, the bullish momentum could not be stretched, as a poor performance in overnight Wall Street, the sagging regional equities amid worries about a broader global economic slowdown and the prospects of a near-term US interest rates hike, simply were not supportive of the local bourse.
In addition, the growing overbought condition of the short-term indicators following a straight four-day steep advance, also was not helping.

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Consequently, the key index succumbed to tremendous pressure to back off from an intra-day high of 1,660.22 in early deals and slipped below the flat line, touching a low of 1,603.25 in the afternoon before finishing at 1,609.21, losing 3,53 points in lacklustre trade on Tuesday, very much in line with regional trend.
The recent market turbulence continued to haunt US investors the next day, which saw the closely-followed overnight Wall Street’s leading indicator, the Dow Jones Industrial Average plummeting a hefty 469.68 points to 16,058.35, as the latest economic data showed growth in the US manufacturing sector slowed to its weakest pace in over two years, triggered a fresh bout of liquidation.
Other risky assets, particularly the crude oil prices tumbled an extra US$3.79 a barrel to US$45.41 due to higher stockpiles.
Against the bearish backdrop in the United States, turmoil returned to the markets in the Asia-Pacific region, with persistent concerns about China’s economy and the fears of a prolonged selloff dragging major indices down by more than 4% in the morning.
On the domestic front, the local bourse also was not spared, with the FBM KLCI slumping to a low of 1,583.63, shedding 25.58 points in early business.
Fortunately, institutional players later emerged from the sidelines to seek value buys and their actions somewhat helped cushion the downside, thus leading the market moved sideways.
At the closing bell, Bursa still lost 19.02 points to 1,590.19 in sluggish trade in mid-week. The rally in Wall Street finally happened, jumping almost 2% in overnight session on fresh bargain hunting nibbling after three days of losses. Taking the cue from a steadier Dow, regional equities drifted higher while financial markets in China and Hong Kong were shut for a public holidays.
Mirroring the offshore trend, Bursa rebounded 12.56 points to 1,602.75 on Thursday, before reversing down 13.59 points to 1,589.16, depressed by frail overseas performance yesterday.
Statistics: On a weekly basis, the major index declined 23.58 points, or 1.5% to 1,589.16 yesterday, against 1,612.74 on Aug 28. Total turnover for the four-day holiday-curtailed week amounted to 7.506 billion units worth RM7.841bil, compared with 11.741 billion shares valued at RM12,172bil changed hands during the regular previous week.
Outlook: The FBM KLCI reversed from the week’s high of 1,660.22 on Tuesday to touch a low of 1,583.62 the next day to trade range-bound, undergoing consolidation.
Despite the market carving out a “key reversal” pattern the previous week, there was not much progress seen on Bursa, as uncertainty from abroad and at home reminded investors to exercise caution in their trading approach.
Apparently, everyone is worried about the health of the world’s second largest economy. Though crude oil prices had bounced off their lows slightly, the outlook remains hazy.
Meanwhile, the ringgit remains fragile and the fears of Federal Reserve hiking interest rates also weighed on investors’ sentiment.
With so much doubts clouding equities, Bursa may sustain the sideways trading until clarity returns, but with a mild positive bias, as it is natural to see some bargain hunting activity, especially now that the market is attempting to stabilise after the recent beatings. The “key reversal” formation recently, added to our optimism.
Technically, indicators are painting a mixed pictogram, suggesting range-bound pattern this week. Current resistance is envisaged at the 1,620 points and stiff resistance is pegged at the 50-day simple moving average of 1,670 points, followed by the 1,700-point psychological barrier.
To the downside, a crack of the immediate support of 1,580 points will probably drag the key index down to the 1,550 points-1,555 points range. The lower 1,530 points-1,532 points floor will become vulnerable and a clear breakdown from the 1,500 points line will have a negative impact on the market outlook.