KLCI still at support level of bullish trend

by **Cals** Thu 05 Jun 2014, 03:10

Business & Markets 2014

Written by Benny Lee

Wednesday, 04 June 2014 09:30

THE FBM KLCI rebounded last week as expected but still faced resistance. Earnings reports for the first quarter of this year are streaming in but the results do not show a promising outlook, hence the market continues to stay cautious.

Foreign institutions were the pillar of support while local institutions were selling. It was quite a choppy market in the past two days. The market pulled back on Monday but the US markets, which recorded historical highs on Monday, boosted market sentiment and the index rebounded yesterday. The KLCI increased only 0.3% in a week to 1,872.55 points yesterday after trading in a range of between 1,861.48 and 1,880.84 points.

The average daily trading volume continued to decline mildly from 1.7 billion to 1.5 billion shares. The market’s cautiousness and probably the current school holidays could contribute to lower volume.

The average daily trading value was firm at RM3.3 billion compared with RM2.1 billion, with the volume specially contributed by the trading of Public Bank shares last Friday valued at about RM2.3 billion.

Trading in the past one week was largely dominated by institutions while local retail investors stayed on the sidelines.

Net buying by foreign institutions from Monday to Friday last week totalled RM967 million while net selling by local institutions and local retail investors came to RM831 million and RM136 million respectively.

However, on Monday foreign institutions were net sellers at RM58.1 million while local institutions were net buyers at RM51.8 million. In the KLCI, decliners overcame gainers 18 to 11. The decliners were led by YTL Corp Bhd (-6.3%), Felda Global Ventures Holdings Bhd (-4.4%) and IOI Properties Group Bhd (-3.5%) while gainers were led by Public Bank Bhd (+5.0%), IOI Corp Bhd (+4.9%) and Petronas Dagangan Bhd (+3.9%).

Markets were generally bullish last week led by the US markets. Singapore’s Straits Times Index increased 0.7% in a week to 3,296.67 points. Hong Kong’s Hang Seng Index rose 1.5% in a week to 23,291.04 points while China’s Shanghai Stock Exchange Composite Index increased only 0.2% in a week to 2,038.31 points.

On Monday, the US Dow Jones Industrial Average increased 0.8% in a week to a record close at 16,743.63 points. London’s FTSE100 Index rose 0.7% to 6,815.75 points while Germany’s DAX Index added 0.6% to 9,950.12 points, also a record high.

The US dollar continued to strengthen for the fourth week against major currencies. The US dollar index increased from 80.45 points to 80.69 points, the highest level in 3½ months. The stronger US dollar continues to put pressure on precious metals while crude oil pulled back.

Commodity Exchange gold fell 3.8% in a week to its lowest level in five months at US$1,242.90 (RM4,014.57) an ounce. Crude oil in the New York Mercantile Exchange declined 1.8% in a week to US$102.45 per barrel. The ringgit weakened against the strong US dollar.

The ringgit is currently at 3.23 against the US dollar, compared with 3.21 a week ago.

Crude palm oil price continued to decline for the third consecutive week, falling 3.8% to RM2,410 per tonne.

The KLCI was in a sideways correction mode in the past one week. The trend is technically bullish as the index stays above the short-term 30-day moving average and the Ichimoku Cloud. It has whipsawed the 1,870-point support level and this is an indication of a directionless market. The close above this level yesterday showed that the bullish trend is still being supported.

There was no momentum last week as the market went sideways. Indicators like the RSI and Momentum Oscillator were bouncing around their mid-levels. The index continued to stay above the support level. However, the KLCI is below the middle band of the Bollinger Bands indicator after pulling back from the top band two weeks ago and this shows that the momentum is in a slightly bearish mode.

It is difficult to see where the market is going to head with the current indicators but nevertheless the index is still bullish. However, the index is at the support level of this bullish trend and only a strong rebound above the immediate resistance level of 1,880 points can lift the market higher.

If the index continues to stay below 1,870 points, we may have to continue expecting a sideway move. The immediate support level for the sideways move is at 1,860 points.

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.

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

Daily FBM KLCI chart as at June 3, 2014.

[size]

This article first appeared in The Edge Financial Daily, on June 4, 2014.[/size]