Pressure builds on market BY K.M.LEE

by **Cals** Mon 04 Aug 2014, 02:03

Published: Saturday August 2, 2014 MYT 12:00:00 AM
Updated: Saturday August 2, 2014 MYT 1:01:48 PM
[size=40]Pressure builds on market[/size]
BY K.M.LEE

REVIEW: Bursa Malaysia was shut on Monday and Tuesday for the Hari Raya festivals.
While we enjoyed the extended weekend, stocks in the Asia-Pacific region staged a rally, shrugging off Wall Street’s retreat, dragged down by disappointing corporate earnings result from Amazon.com, exacerbated by weak German economic data.
Gains in the Asian markets were encouraged by Hong Kong’s Hang Seng Index, rising almost 1% on news that Chinese officials had approved the setting up of private banks, fuelling hopes Beijing would undertake more economic reforms to bump her economy.
Riding on the bullish regional strength, shares on the local bourse jumped at the opening bell on Wednesday, with the FBM Kuala Lumpur Composite Index (FBM KLCI) spiking a significant 6.74 points to 1,884.08 on resumption of business after the long break, playing catch up.

Blue chips led the winners board amid buying from institutional funds. Elsewhere, second and lower liners also were steadier on speculative plays.
Soon, the key index raced to a high of 1,886.39 but unfortunately, the positive momentum could not be stretched, as continuous losses in the Dow Jones Industrial Average and the unfavourable technical reading prompted investors to quickly book gains.
In the wake of profit-taking, the key index came off the day’s peak to settle up one point to 1,878.34, with advancers narrowly beating decliners by 461 to 408.
The key index tacked on a further 3.34 points to 1,881.68 in early deals the next day while the local bourse attempted to move out of the current consolidation mode on the back of an improving global economic outlook.
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Unfortunately, it was proven a futile effort, as sustained downward momentum in overnight Dow, shedding 31.75 points to 16,880.36 and a mixed showing in major markets in the region, reminded the bulls to abort the move.
In lacklustre session, the FBM KLCI drifted from an intra-day high of 1,882.07 in the morning to a low of 1,866.47 in the afternoon before trimming losses slightly to end at 1,871.36, slumping 6.98 points on Thursday.
Thereafter, sellers dominated the floor and declines in the blue chips pulled the local market down 8.02 points to 1,863.34 yesterday, undermined by a plunge in the Dow overnight.
Statistics: On a weekly basis, the major index lost 14 points, or 0.7% to 1,863.34 yesterday, against 1,877.34 at the close on July 25.
Total turnover for the three-day holiday-curtailed week amounted to 6.711 billion shares valued at RM6.771bil, compared with 11.04 billion units worth RM9.901bil changed hands the prior week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were on the slide. It had triggered a short-term sell at the 78% level on Thursday.
The past week saw the 14-day relative strength index curving down from a reading of 49 in mid-week to end at the 28 points level yesterday.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram prolonged the negative expansion against the daily trigger line to stay bearish. A sell signal was issued on July 11.
Weekly indicators deteriorated further, with the weekly slow-stochastic momentum index extending the downtrend and the weekly MACD keeping the sell signal.
Outlook: The bulls had a fairly good chance to come out of consolidation mode the past week, but succumbed to fresh selling to retreat deeper into the red on extended correction process.
Very clearly, overall market sentiment is waning, as geopolitical factors, the prospects of an upward adjustment in interest rates in the US, the health of the Portugeuse banking sector and Argentina’s default on its debt overwhelmed positive data.
Based on the daily chart, the local bourse is in great danger of carving out a downtrend channel following recent weakness. With the falling 14-day and the 21-day simple moving averages continuing to pressure the market, and the downward spiral in Wall Street weighing on global equities, Bursa Malaysia will probably be extending the correction in the absence of fresh catalyst on the horizon.
Technically, all the short-term indicators on our screen are ugly.
A clear violation of the 1,860 points floor may drag the FBM KLCI lower to the 200-day simple moving average (SMA) of 1,840. Important floor is pegged at the 1,835 points, of which a crack will send the market into the bear territory.
To the upside, a close above the 21-day SMA of 1,881 may clear the way for a re-test of the historical peak of 1,896.23, or the 1,900 points psychological level.