Market still directionless

by **Cals** Thu 07 Apr 2016, 01:05

Market still directionless

By Benny Lee / The Edge Financial Daily | April 6, 2016 : 10:46 AM MYT

This article first appeared in The Edge Financial Daily, on April 6, 2016.

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THE FBM KLCI rebounded last week but was faint as the index pulled back after the index tried to test the resistance level at 1,726 points. The FBM KLCI only managed to rise as high as 1,726 points. The rebound was caused by the stronger ringgit but was not enough to further boost market confidence as regional market performances were mixed and crude oil price fell. The FBM KLCI increased only 0.4% in a week to 1,710.55 points last Friday.

Trading volume declined last week and this indicates that market confidence is weak despite the increase. The average daily trading volume in the past one week was 1.7 billion shares as compared with 2.1 billion two weeks ago. The average trading value fell from RM2.4 billion two weeks ago to RM2.1 billion.

Net buying by foreign institutions last week was RM938 million and net selling by local institutions was RM1.04 billion. Net selling by local retail was RM102 million. The Malaysian ringgit strengthened against the US dollar to 3.88 last Friday, the strongest in eight months.

Gainers outpaced decliners three to two in the FBM KLCI. The top gainers for the week were Genting Bhd (+4.4% in a week), RHB Capital Bhd (+2.2%) and Westports Holdings Bhd (+2.2%). The top decliners were YTL Corp Bhd (-3.0%), IOI Corp Bhd (-2.4%) and British American Tobacco Bhd (-1.1%).

Markets in Asia were mixed. China’s Shanghai Stock Exchange Composite Index increased 1% in a week to 3,008.98 points last Friday. Hong Kong’s Hang Seng Index rose 0.7% in a week to 20,498.92 points but Singapore’s Straits Times fell 1% to 2,818.49 points. The Japanese market plunged last Friday on gloomy manufacturing data. The Nikkei 225 index fell 4.9% in a week to 16,164.16 points.

The US market remained bullish while European markets were mixed. The US market climbed to its highest level in four months. The Dow Jones Industrial Average increased 2.3% in a week to 17,792.75 points. Germany’s DAX Index declined 0.9% in a week to 9,794.64 points, and London’s FTSE 100 increased 0.6% to 6,146.05 point.

The US dollar weakened against major currencies. The US Dollar Index futures declined from 96.2 points a week ago to 94.6 points, the lowest in five months. Comex Gold increased only 0.5% in a week to US$1,222.50 (RM4,804.42) an ounce. US crude oil (West Texas Intermediate) fell 7.6% in a week to US$36.63 a barrel. Crude palm oil on Bursa Malaysia increased 1% in a week to RM2,748 per tonne after pulling back from a two-year high at RM2,783.

The whipsaw in the past one week shows uncertainty as this indicates a correction, just as we have expected last week. Nevertheless, the FBM KLCI is still bullish above the short-term 30-day moving average and the Ichimoku Cloud indicator. The index is also above the short-term uptrend support line.

The directionless market caused momentum indicators to continue to decline, showing a weak momentum. The Relative Strength Index and momentum oscillator indicators continue to decline, and the moving average convergence divergence indicator fell below its moving average. The Ichimoku Cloud indicator is beginning to expand this week. An expansion indicates that the correction is over and the FBM KLCI may move into a direction.

Immediate support and resistance levels for the FBM KLCI are at 1,680 points and 1,728 points, respectively. The index is in between these levels and therefore still in a directionless correction. The direction of the index depends on which level the index breaks. If the index stays above the support level at 1,680 points in this correction, the FBM KLCI may climb to the next resistance level at 1,740 points. With the expansion of the Ichimoku Cloud indicator, expect the FBM KLCI to move into a direction in the next two weeks.

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Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at[email=bennylee.kl@gmail.com][size=15][You must be registered and logged in to see this link.][/email]. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.[/size]
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