Bulls yet to fill gap Bursa likely to stay in consolidation mode

by **Cals** Sat 22 Jun 2013, 16:54

Published: Saturday June 22, 2013 MYT 12:00:00 AM
Updated: Saturday June 22, 2013 MYT 10:30:43 AM
Bulls yet to fill gap Bursa likely to stay in consolidation mode

REVIEW: Tracking Wall Street declines the previous Friday, Bursa Malaysia kicked off the week on an easier note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) dropping 1.79 points to 1,760.40 in cautious mood.
Business was slow initially, but it picked up steam later, as institutional funds came out to indulge in bargain hunting, buying on dips following an unexpected fall the prior week.
A steadier showing major stock exchanges in the Asia-Pacific region also aided the local sentiment.
In the wake of buying, the key index reversed early losses to finish at 1,772.17, up 9.98 points on Monday, driven by select heavyweights.
The Dow staged a rebound, up 109.67 points to 15,179.85 amid bargain hunting interest the next day, boosted by investors’ optimism that the Federal Reserve would reaffirm its policies of supporting the economic recovery at the end of a two-day meeting.
Surprisingly, regional markets were mixed with many players taking a cautious stance, awaiting for an outcome of the US Federal Open Market Committee’s plans for its stimulus programme.
Given the lack of clear direction from abroad, some local boys opted to book profit. Apparently, their action dragged the key index to a low of 1,765.38 in mid-morning but it managed to crawl back later to end on the plus side, saved by foreign nibbling in select blue chips.
At the final bell, the FBM KLCI eked out a small 1.88 points to 1,774.05 on Tuesday.
US stocks firmed for the second straight day, up 138.38 points to 15,318.23, as investors grew more confident that the Federal Reserve would temper its recent statements on the future easing of US monetary support, while still pointing to an economic improvement.
Like the previous day, equities in the region extended the mixed pattern, while market makers looked for fresh clues, pending the Federal Reserve’s decision.
Though Bursa advanced to an intra-day high of 1,782.41 in early session, a bout of selling soon cut off the potential of the market moving higher.
In lacklustre session, the key index surrendered early gains to end 1.17 points lower at 1,772.88 in mid-week.
Thereafter, profit-taking activity ruled the floor, as Bursa was spooked by overseas markets rout on news that the US central bank would begin to withdraw stimulus this year if the world’s largest economy continued to recover as it expected.
In sluggish trade, the FBM KLCI drifted between an intra-day high and low of 1,766.73 and 1,758.86 respectively before closing at 1,762.34, slumping 10.54 points on Thursday. The local bourse shed an additional 6.49 points to 1,755.85 on extended liquidation amid dearth of market-stimulating leads yesterday.
Statistics: On a weekly basis, the principal index eased 6.34 points, or 0.4% to 1,755.85, against 1,762.19 on June 14.
Turnover for the week stood at 8.724 billion units worth RM11.063bil, compared with 10.38 billion shares valued at RM12.234bil changed hands a week ago.
Technical indicators: The daily slow-stochastic momentum index was on the slide after triggering a short-term sell on Thursday. It had peaked out at the 75% level earlier.
Mirroring the downtrend, the 14-day relative strength index weakened further from a reading of 53 to settle at the 36 points level.
In addition, the daily moving average convergence/divergence (MACD) histogram sustained declines, in tandem with the daily signal line to stay bearish. It had issued a sell on May 23.
Weekly indicators were deteriorating, with the weekly slow-stochastic momentum index extending the fall and the weekly MACD painting a tentative topping out pictogram.
Outlook: Bursa was in correction mode the past week, with the FBM KLCI violating the 50-day simple moving average (SMA) during intra-day session yesterday, depressed by a tumble in global markets, which saw most major indices coming off significantly from their historic peak or multi-year highs.
World equity markets were in a tailspin apparently, because investors had overplayed the stimulus theme song in the past several months. Going forward, they are expected to experience greater volatility, with the Fed beginning to wind down its stimulus spending later this year and China’s economy showing signs of slowing.
In the wake of uncertainty from abroad clouding Bursa, the bulls at home may take the excuse of limited investors’ participation to fill the 1,743.14 points-1,712.03 points runaway gap in the immediate-term.
Technically, most of the indicators are frail, suggesting the local bourse is likely to stay in consolidation mode until a new lead emerges.
Stronger support is pegged at the 1,700 points, coincidentally also the 100-day SMA, of which a crack would see the lower 200-day SMA of 1,673 becoming vulnerable.
Initial resistance is expected at the 1,770 points, followed by the 1,800 points psychological barrier and the next, at the 1,826.22 points level.