Market expected to be bullish this week

by **Cals** Wed 14 May 2014, 17:34

Business & Markets 2014

Written by Benny Lee

Wednesday, 14 May 2014 10:03

LAST week, I mentioned that the market was hanging in a balance between the bull and the bear, and in the past one week, the bull seemed to be stronger.

The FBM KLCI mildly rebounded on strong bullish market performance in the US and rebounds in the regional markets. The KLCI increased only 0.3% in a week to 1,866.08 points on Monday after trading in a range of between 1,853.31 and 1,867.40 points. The index could have closed higher if it was not dragged down by strong selling in Petronas Dagangan Bhd (PetDag).

Trading volume remained firm but relatively low compared to the previous months. This is an indication that the market is still being cautious. The average daily trading volume in the past one week was 1.7 billion shares. The average trading value was RM1.9 billion compared with RM1.7 billion two weeks ago, indicating the trading of higher priced stocks.

Foreign institutions continued to be net buyers throughout last week. The stronger ringgit may be the catalyst for foreign buying. Net buying by foreign institutions was RM327.2 million while net selling by local institutions and retail investors stood at RM271.2 million and RM56.0 million respectively.

In the KLCI, gainers beat decliners 19 to 8. Gainers were led by YTL Corp Bhd (+2.5%), Axiata Group Bhd (+2.2%) and Hong Leong Bank Bhd (+2.2%), while decliners were led by PetDag (-10.6%), CIMB Group Holdings Bhd (-0.8%) and British American Tobacco (Malaysia) Bhd (-0.8%).

Markets were directionless last week and this was a sign of cautiousness. Singapore’s Straits Times Index declined 0.6% in a week to 3,222.43 points on Monday. Hong Kong’s Hang Seng Index rose 1.3% in a week to 22,261.61 points and China’s Shanghai Stock Exchange Composite Index also increased 1.3% in a week to 2,052.87 points.

The US Dow Jones Industrial Average increased 1% in a week to 16,695.47 points. However, London’s FTSE100 index increased only 0.4% to 6,851.75 points while Germany’s DAX increased 1.8% in a week to 9,702.46 points.

The US dollar index rebounded strongly last week after the US Federal Reserve committed to continuing to keep interest rates low until the economic growth becomes steady.

The US dollar index increased from 79.13 points a week ago to 79.96 points. Commodity Exchange Gold declined only 1.1% in a week to US$1,295.50 (RM4,197.42) an ounce. The New York Mercantile Exchange WTI crude rose 1.2% in a week to US$100.62 per barrel.

The ringgit strengthened against the US dollar from 3.26 in the previous week to 3.23. Crude palm oil rebounded mildly, rising only 0.2% in a week to RM2,589 per tonne.

The KLCI continued to trade within the support and resistance levels of the triangle chart pattern. The trend was bullish as the index stayed above the short-term 30-day moving average and above the Ichimoku Cloud. The short-term or immediate support level remained at 1,845 points and the immediate resistance level is at 1,870 points. The bullish trend should be able to continue if the index is able to break above the immediate resistance level.

The momentum of the bullish trend is steady as momentum indicators like the RSI, MACD and Momentum Oscillator are above their mid-levels. Therefore, there is a high chance for the KLCI to test the resistance level at 1,870 points, thus continuing its uptrend. Furthermore, the Bollinger Bands are steadily expanding upwards and the index is trading above the middle band.

If the index is able to break above the immediate resistance level of 1,870 points, it confirms the triangle pattern which has a short-term target at 1,900 points. I am expecting the market to be bullish this week as the technical indicators on the KLCI are being supported well.

The index is expected to test this immediate resistance level this week and climb higher in the short term towards 1,900 points, unless there are any reversal indications.

If the KLCI fails to break above 1,870 points, then expect it to further consolidate sideways.

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Daily FBM KLCI chart as at May 12, 2014.

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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 May 14, 2014.[/color][/size]