Bears continue to dominate Saturday, 6 December 2014 By: K.M. LEE

by **Cals** Mon 08 Dec 2014, 02:36

Bears continue to dominate

Saturday, 6 December 2014
By: K.M. LEE

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

REVIEW: Light sweet crude, also known as West Texas Intermediate traded on the New York Mercantile Exchange suffered a severe beating, plunging US$7.54 a barrel or more than 10% to US$66.15 on the previous Friday, the worst drop since March 2009, as traders scrambled to the sidelines looking for cover after Opec decided not to cut output to arrest the meltdown of the commodity prices.
In the wake of renewed uncertainty, Bursa Malaysia slipped into the negative area soon after opening the week 0.63 point above the flat line at 1,821.52.
There was no respite as the plunge in oil and gas-related counters quickly spread to other sectors, spooked by unfavourable news that Petronas would reduced capital expenditure next year due to falling global oil prices.
The weakening of the ringgit against the greenback and an uninspiring performance of regional equities added to the downbeat note.
Meanwhile, China’s latest official economic data – which show manufacturing activity in the world’s second-biggest economy slowed last month – weighed on the local sentiment.
Against the bearish backdrop, the key index slumped to a low of 1,768.21, shedding a hefty 52.68 points or 2.89% in mid-afternoon before paring losses slightly in late hour to close down 42.62 points to 1,778.27 on lack of support on Monday.
The next day, US stocks closed lower, but regional markets shook off the frail lead from Wall Street and trade higher, recouping some of their recent losses, as a relief recovery in the black commodity lifted resources firms.
The appreciation of the local currency versus the US dollar also supported the domestic market, but trading was pretty volatile, with the FBM KLCI swinging from the positive area to the negative side before crawling back to the plus territory.
At the final bell, the local bourse chalked up 7.7 points to 1,785.97 in mixed note on Tuesday. Sadly, after a brief breather, Bursa resumed the downward spiral, tracking the lower oil prices and the softening ringgit.
In lacklustre session, the FBM KLCI swooned 27.82 points to 1,758.15 in mid-week and an extra 12.46 points to 1,745.69 amid extended selling on Thursday.
In another volatile session, the key index fluctuated between an intra-day high and low of 1,755.94 and 1,740.56 respectively before ending up 3.68 points to 1,749.37 yesterday.
Statistics: For the week, the principal index tumbled 71.52 points, or 3.9% to 1,749.37 yesterday, versus 1,820.89 on Nov 28.
Total turnover for the week stood at 9.761 billion units worth RM11.168bil, against 9.486 billion shares valued at RM9.2bil done a week ago.
Outlook: Bursa has slipped below the most recent ebb of 1,766.22 to touch a low of 1,740.56 yesterday, the worst level in 15 months, as a confluence of negative factors, such as the weakening of the local currency against the greenback and the plunging of oil prices and other commodities, triggered a fresh bout of liquidation pressure.
Following the negative breakdown, the local bourse is now bearish. The market would be overwhelmingly negative, if the key index continues to flirt sharply below the lowest 14-day simple moving average (SMA) and to come out of the rut, it is going to be a very difficult task for the bulls.
Based on the daily chart, the FBM KLCI will probably be under pressure in the short term, with the recent multiple “dead crosses” on our radar staying intact and crude oil seeming to have no floor apparently while Saudi Arabia, the world’s largest oil producer still offering discounts to Asian and US buyers.
Given the prevailing uncertainty clouding the local bourse, it is best to stay on the sidelines.
Searching the bottom for the market is always not easy but investors should take note that a bullish reversal always starts with a rebound. Here, we are not talking about one day or two days spike, but a more consistent recovery, preferably pushing the FBM KLCI back to above the uppermost 200-day SMA and keeping the posture there for several weeks to unknot all the recent “dead crosses”.
Only this way will the market is certain of a turnaround. So, look out for that.
For now, indicators are painting a bearish landscape, also screaming grossly oversold at the same time. Technically, Bursa should stage a relief upward adjustment, but whether it could sustain today’s bounce will very much depends on how crude oil perform.
Initial support is seen at 1,720 points. A crack of the 1,700-point psychological level would see the lower floor of 1,660.39 becoming vulnerable.
To the upside, resistance can be expected at the 14-day SMA of 1,804, followed closely by the 21-day SMA of 1,810, 50-day SMA of 1,818, 100-day SMA of 1,842 and the next, at the 200-day 1,850 points.