Market cautiously bullish, showing signs of stronger resistance

Market cautiously bullish, showing signs of stronger resistance
Business & Markets 2014
Written by Benny Lee  
Wednesday, 05 March 2014 11:55

IN MY previous article, I mentioned that the market may remain slightly bullish as market players continue to be cautious in a somewhat bullish sentiment. The stronger ringgit helped support the market against a background of mixed corporate earnings. Performances in the global markets were also mixed and this did not help boost market confidence.

The FBM KLCI declined 0.4% in a week to 1,826.46 points after trading in a slightly volatile range between 1,820.59 and 1,836.14 points. Last week, I expected the index to trade between 1,809 and 1,830 points. The close near the middle of the trading range indicated uncertainty.

Trading volume eased last week. The average trading volume was 2.7 billion shares compared to 3.1 billion shares two weeks ago. The average trading value was RM2.3 billion.

Last week, local institutions turned net sellers with RM461 million while net buyers were foreign institutions at RM296.2 million and local retail at RM164.9 million.

In the KLCI, gainers outpaced decliners 17 to 13 and were led by IOI Corp Bhd (+9%), Astro Malaysia Holdings Bhd (+4.3%) and Sime Darby Bhd (+2.8%) while decliners were led by Genting Bhd (-2.8%), UMW Holdings Bhd (-2.7%) and YTL Corp Bhd (-1.9%).

Markets were mixed on lack of news and catalysts and the Ukraine crisis pulled European markets down. Singapore’s Straits Times Index was almost unchanged in a week at 3,104.71 points. Hong Kong’s Hang Seng Index increased 1.5% to 22,657.63 points but China’s Shanghai Stock Exchange Composite Index rebounded and increased 1.8% in a week to 2,071.47 points. Japan’s Nikkei 225 Index declined 2.2% in a week to 14,721.48 points.

On Monday, the US Dow Jones Industrial Average declined 0.2% in a week to 16,168.03 points. London’s FTSE100 Index declined 2.3% to 6,708.35 points after pulling back from a 14-year high last Monday at 6,865.86 points. Germany’s DAX Index declined 3.6% to 9,358.89 points.

Commodity prices rose on uncertainty in the equity markets. Commodity Exchange gold rose 1% in a week to US$1,350.30 (RM4,429) an ounce. New York Mercantile Exchange crude oil increased 1.9% to US$104.86 per barrel. The US dollar index weakened slightly in the past week from 80.22 points to 80.09 points two weeks ago. The ringgit was firm against the US dollar at 3.28. Crude palm oil futures continued to rally, rising 2.6% in a week to RM2,805 per tonne.


Daily FBM KLCI chart as at March 4, 2014.
The KLCI remained bullish but is struggling to climb higher. The index is above the short-term 30-day moving average but this average is flat. The KLCI has tested the Ichimoku Cloud resistance level but pulled back. However, KLCI is still below the 61.8% Fibonacci retracement level at 1,840 points from the downtrend since January.

In Fibonacci analysis, the trend will be reversed once this last important retracement level is broken. Till then, the KLCI will still be in a downward trend correction.

The sideways movement in the past two weeks has caused momentum indicators to indicate a weak trend. The RSI remained flat near the mid-level and the Momentum Oscillator pulled back to near its middle level. The MACD indicator is still increasing but the momentum is getting weaker as it converges against its moving average. Furthermore, the KLCI is moving away from the top band of the Bollinger Bands indicator but is still above the middle level or 20-day moving average. These indicators continue to indicate that the index is still in a correction.

There were not many changes to the technical indicator readings as compared to the previous week. The mixed market performance globally does not help to set market trend. However, if the ringgit continues to strengthen, it will help boost market confidence.

We can also see that the foreign institution selling has ended. We continue to expect the market to be cautiously bullish and the index may test the 1,840-point resistance in the short term. A breakout above this resistance level could see the market climbing to record highs in the near term. If it fails, then we expect further sideway movement.


Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia committed to offering the best services to a wide range of customers. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . 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.


This article first appeared in The Edge Financial Daily, on March 05, 2014.

[You must be registered and logged in to see this image.]

[size=11.111111640930176]Daily FBM KLCI chart as at March 4, 2014.[/size]