Year-end rally dims

by **Cals** Sun 13 Dec 2015, 23:01

Saturday, 12 December 2015

Year-end rally dims

BY MARKET TREND . . . K.M.LEE

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REVIEW: Taking the cue from an overwhelming bullish tone in overnight Wall Street, Bursa Malaysia started out the week on a steadier note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) advancing 2.38 points to 1,670.25, snapping a three-day losses in the wake of fresh bargain hunting nibbling.
As usual, blue chips led the way amid support from institutional funds, underpinned by a stronger ringgit against the greenback while most second and lower liners rose on speculative plays.

However, the upside potential was limited, as a plunged in crude oil prices, which saw the black, tumbling a steep US$1.11 a barrel to US$39.97, and the mixed showing in regional stock markets pending the release of China’s economic data, reminded investors to exercise caution in their trading approach.
In range-bound session, the key index chalked up 4.13 points to 1,672.00 on Monday.
After posting huge gains on an upbeat employment report, Wall Street reversed trend quickly, dropping 117.12 points to 17,730.51 the next day, hauled down by resource-related issues, especially energy shares due to lingering worries about supply gluts while concerns about Chinese demand weighed on other hard and soft commodities.
Crude oil prices sustained the downward spiral, plunging an extra US$2.32, or 5.8% to US$37.65 a barrel, touching their lowest level in almost seven years, after a meeting of members of the Organisation of Petroleum Exporting Countries cartel concluded with disagreement over production cuts and without a reference to its output ceiling, exacerbated by a stronger US dollar.
As expected, equities in the region reacted negatively the next day to the bearish tone in Wall Street while oil prices continued to struggled in electronic trading in Asia.
Chinese stocks led declines, with the Shanghai Composite Index plummeting 1.9% after exports fell for the fifth consecutive month while the rout in crude oil prices unnerved investors ahead of an anticipated interest rates hike in the United States next week.
Tracking global losses, the FBM KLCI opened 2.33 points lower at 1,669.67 and slipped to a low of 1,665.97 in early session, but unlike the overseas peers, trading on the local bourse was calm, as sporadic bargain hunting interest on weakness by the big boys, helped cushion the downside, thus keeping the market within a moderate band.
In a sideways pattern, Bursa lost only a small 2.76 points to 1,669.24 at the final bell on Tuesday.
Thereafter, persistent liquidation offsetting light bargain hunting interest dominated the floor, with sustained downtrend in Wall Street pressuring the local bourse.
An uninspiring regional trend and frail crude oil prices added to the downbeat mood.
In the absence of compelling leads on the horizon to boost sentiment but trigger further selling, the key index shed 9.88 points to 1,659.36 in mid-week, losing 10.71 points to 1,648.65 in sluggish session on Thursday and easing an additional 8.51 points to 1,640.14 on extended liquidation yesterday, ignoring a steadier Wall Street, which witnessed the Dow snapping a three-day losing streak in overnight trade.
Statistics: On a weekly basis, the major index skidded 27.73 points, or 1.7% to 1,640.14 yesterday, compared with 1,667.87 at the final bell on Dec 4.
Total turnover for the week amounted to 8.901 billion units worth RM9.072bil, against 10.391 billion shares worth RM11.422bil traded a week ago.
Outlook: Bursa declined for the second straight week, as an earlier sideways pattern gave way to increase selling pressure.
The weakness in the overall market condition has resulted in the key index violating the lowest 100-day simple moving average (SMA) and worst of all, below the most recent lows of 1,644.29, thus triggering a negative breakdown on the chart.
Theoretically, the local bourse would be under pressure in the short term, setting the stage for more downward moves, with investors continuing to fret about interest rate hike in the United States and frail commodity prices weighing on the local sentiment.
This may mean that the prospects of a traditional year-end rally has now becomer dimmer.
However, we beg to differ and reckon that the local bourse is likely to post minor gains this week in anticipation that crude oil prices may stage a relief recovery on short-covering due to a grossly oversold condition while the ringgit is largely range-bound against the greenback after the recent appreaciation.
Apparently, indicators are deteriorating and should there be a technical rebound due to oversold reason, the upside potential will be capped, with most investors adopting a cautious stance until a clearer picture emerges.
To the upside, the key index will now face resistance at the 100-day SMA of 1,659 points, followed by the 1,690-1,700-point band. Greater hurdle is expected either at the 200-day SMA of 1,722 points, or the recent high of 1,727.41 points. As for the downside, initial support is seen at the 1,590-1,600-point area. A crack of the lower support of 1,568 points may see the August’s lows of 1,503.68 becoming much weaker