Market to trade sideways BY K.M. LEE

by **Cals** Mon 30 May 2016, 02:48

Saturday, 28 May 2016

Market to trade sideways

BY K.M. LEE
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REVIEW: Bursa Malaysia started out the week a touch higher, with the FBM KLCI rebounding 0.04 of-a-point to 1,628.83 following a solid finish on Wall Street overnight.
Though blue chips attracted some support from the local funds, tracking the firmer Asia-Pacific markets trend during the day, the underlying tone of the broader market was decisively cautious, with most second and lower liners drifting lower on lack of support from the retail players, as crude oil prices fell due to a stronger US dollar.

Apparently, the two-tier market tone was clearly painted on the scoreboard.
Despite the key index ended up 6.10 points to 1,634.89, losers beat winners by 451 to 337 on Monday.
Nevertheless, after a moderate rally, the bulls on Wall Street paused for a breather, with the Dow easing a small 8.01 points to 17,492.93 in overnight session on concerns the US Federal Reserve would hike interest rates sooner than later.
Elsewhere, Light sweet crude slipped for the fourth consecutive days, shedding 33 cents to US$48.08 per barrel on news that producers in Canada were set to resume operations after wildfires and Iran promised to ramp up output while the number of shale oil producers in the US held steady.
Meanwhile, most Asian equities traded in the red the next day, as persistent fears about a possible increase in interest rates by the Fed as soon as next month, dampened sentiment and weighed on the local bourse.
In the absence of fresh market-stimulating leads on the horizon, shares on the local bourse retreated on lack of support while traders continued to fret about the outlook for US central bank policy, exacerbated by worries about the health of the Chinese economy.
Certain quality stocks topped the losers’ list amid foreign liquidation. Elsewhere, second and lower liners also fell on profit-taking activity.
In lacklustre trade, the FBM KLCI lost 9.05 points to 1,625.84, ending near the day’s low of 1,625.81 on Tuesday.
After a brief consolidation process, the bulls on US markets struck back with a vengeance the following day, with the Dow jumping a huge 213.12 points to 17,706.05 and crude oil prices spiking 1.1% to US$48.62 a barrel, as investors were of the view that the Fed was on track to raise interest rates sooner rather than later and they have made peace with that amid optimism the solid US economy could support a higher interest rates environment.
As expected, markets in the region steadied, as investors danced to the US tune.
In stark contrast, investors on the home front were evidently more cautious, with the FBM KLCI drifting aimlessly on sporadic bargain hunting offsetting profit-taking.
That was the trend until the very last minute where a fresh bout of bidding in the blue chips by the local big boys helped propel the index up 5.12 points to 1,630.96 in mid-week.
In another almost similar fashion, the key index fluctuated between an intra-day high and low of 1,638.17 and 1,628.19 respectively throughout before ending almost flat, up 0.13 point to 1,631.09 on Thursday.
And yesterday, Bursa Malaysia gained 6.10 points to 1,637.19 on follow-through interest, tracking the regional performance.
Statistics: On a Friday-to-Friday basis, the major index added 8.4 points, or 0.5% to 1,637.19 yesterday, against 1,628.79 on May 20.
Weekly turnover stood at 8.514 billion shares amounted to RM8.393bil, compared with 8.39 billion units worth RM8.848bil changed hands the previous week.
Outlook: Bursa Malaysia’s benchmark FBM KLCI posted gains for the second straight week amid continuous bargain hunting offsetting profit-taking.
However, like the previous week, the upward momentum was small and the underying tone of the broader market was decisively cautious, as the local funds were reluctant to bet big while foreign investors were still in liquidation mood despite the ringgit strenghthening against the greenback on the back of stronger crude oil prices.
Perhaps, the local players were worried about the impact of the Fed hiking interest rates eventhough the US investors were singing a different mantra.
Generally, a rise in interest rates usually does not bode well for risky assets.
While awaiting for a clearer picture to emerge, it is best investors exercise some degrees of caution in the trading approach.
Based on the daily chart, the key index had somewhat carved out a range-bound pattern the past couple of week and it is very likely the market will extend the sideways style until a fresh catalyst emerges.
Technically, the daily moving average convergence/divergence histogram is seen improving after issuing a buy signal on Tuesday but in stark contrast, the weekly MACD retained the bearish note.
Given the tricky reading, Bursa Malaysia will probably be trapped, but with a mild upward bias on the fact that the daily slow-stochastic momentum index and the 14-day relative index are rising.
Concrete floor is pegged at the 1,600 points psychological level.
On the upside, the FBM KLCI will face significant resistance at the 21-day SMA of 1,640 points, followed by the 1,660 points.
A breach of the upper hurdle of 1,670 points may drive the market up to challenge the uppermost 50-day SMA of 1,684 points.