Lower liners to lead rally? BY K.M LEE

by **Cals** Sun 17 Nov 2013, 21:21

Published: Saturday November 16, 2013 MYT 12:00:00 AM
Updated: Saturday November 16, 2013 MYT 9:18:53 AM
Lower liners to lead rally?
BY K.M LEE
[You must be registered and logged in to see this image.]

REVIEW: Against the backdrop of a stronger-than-expected surge in US jobs growth in October and the bullish sentiment in US risky assets, many people had expected stocks in the Asia-Pacific region to start the week on a solid note.
Unfortunately, that was not the story as they turned mixed.
Japan’s Nikkei 225-shares, Hong Kong’s Hang Seng Index and China’s Shanghai Composite were firmer. On the flipside, South Korea’s Kospi Index, Australia’s S & P/ASX 200-share Index and India’s Sensex Index slipped amid worries the Federal Reserve may soon be winding down its US$85bil monthly bond-buying programme.
In the absence of clear direction from the regional peers, shares on Bursa Malaysia drifted sideways on profit-taking activity offsetting bargain hunting interest, with the benchmark FBM Kuala Lumpur Composite Index flirting between an intra-day high and low of 1,806.23 and 1,802.77 respectively, a pretty tight 3.46 points range throughout.
Trading in the blue chips were dull on lack of support from funds, but second and lower liners attracted significant interests on speculative plays.
At the closing bell on Monday, the local bourse eased 0.27 of a point to 1,804.21 on consolidation.
Overnight US stocks edged up to settle at a record closing high amid follow-through nibbling the next day.
Surprisingly, sentiment in the region was the same, awaiting the release of economic policy details from a key meeting of China’s ruling Communist Party in Beijing.
At home, investors continued to fret about the negative impact should the US Federal Reserve begin tapering or tightening soon.
As expected, quality issues slide on foreign liquidation, pulling the key index down 9.41 points to 1,794.80 but cheaper stocks continued to enjoy brisk business amid greater retail participation on Tuesday.
In a similar style, Bursa declined an extra 12.31 points to 1,782.49 on extended correction in mid-week.
Come Thursday, the local bourse bounced back from an early hiccup to finish firmer, rising 1.71 points to 1,784.20, as institutional investors emerged from the sidelines to seek bargain buys after two days of losses, spurred by Wall Street’s solid performance overnight, which drove the Dow to an all-time high level and regional markets showing signs of stabilising on hopes that the Federal Reserve would keep its stimulus programme in place.
Thereafter, the FBM KLCI tacked on an additional 5.67 points to 1,789.87 on persistent bargain hunting interest in the blue chips yesterday.
Statistics: On a Friday-to-Friday basis, the major index skidded 14.61 points, or 0.8% to 1,789.87 yesterday, versus 1,804.48 at the close on Nov 8.
Total turnover for the regular week stood at 9.872 billion shares valued at RM9.516bil, against 7.721 billion units worth RM7.353bil changed hands during the four-day holiday-curtailed previous week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index sustained declines to the oversold area during the week before making an attempt to reverse up yesterday.
The past week saw the 14-day relative strength index touching a low of 22 in mid-week before curving up slightly to settle at the 34 points level yesterday.
On the contrary, the daily moving average convergence/divergence (MACD) histogram continued to expand negatively against the daily trigger line to stay bearish. It had issued a sell on Nov 4.
Weekly indicators were deteriorating, with the weekly slow-stochastic momentum index sliding and the weekly MACD flashing a sell signal.
Outlook: Trading in the blue chips were a big let down. Instead of taking comfort in Bernanke’s nominate successor, Janet Yellen’s dovish remarks on the prospect of extended US monetary stimulus, they spent the past week in extended correction mode.
The euphoria in the second and lower liners, with some posting handsome gains, was good enough to keep the market busy and make many people happy.
The conviction is the traditional year-end rally may have just begun without us realising. Unlike yesteryears, it is led by this basket of non-FBM KLCI bearing issues and hence, not reflected in the index this round.
Should the blue chips decide to join the party later, the market would progress into a full blown year-end rally.
Technically, the negative expansion of the daily MACD and the sell signal on the weekly MACD suggest that the FBM KLCI is likely to stay in correction mode in the short-term.
A crack of the 100-day simple moving average (SMA) of 1,776 points may drag the key index down to the 200-day SMA of 1,736 points. In this case, the lower 1,700 points psychological support line would be much weaker.
The immediate resistance is envisaged at the 1,800-1,805 points band and heavy barrier is kept at the historical peak of 1,826.22 points.