Overall bearish sentiments

by **Cals** Sun 24 May 2015, 17:19

Overall bearish sentiments

Saturday, 23 May 2015

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REVIEW: Taking the cue from a steadier US equities overnight, Bursa Malaysia kicked off the week marginally firmer, with the FBM Kuala Lumpur Composite Index (FBM KLCI) rising 1.6 points to 1,813.52, extending the previous session’s uptrend amid follow-through bargain hunting interest.
Though the local sentiment was positive in early business, an unspiring peformance in Asian equities, coupled with a lower crude oil prices were supportive of a rally and subsequently, the key index turned sideways.
That was the trading pattern until the very last minute, where a sudden bout of bidding in select heavyweights, such Petronas Gas Bhd and Tenaga Nasional Bhd sent the market significantly higher.
At the final bell, the FBM KLCI chalked up 11.58 points to 1,823.50 on Monday.
The index’s closing at the day’s peak on Monday was interpreted as a bullish development technically. Together with Wall Street sustaining the upward momentum to record highs in overnight session on hopes the Federal Reserve will defer hiking interest rates and most regional bourses drifting higher, the bulls have the right ingredients to charge forward on Tuesday.
However, that was not the story, as an extended downward correction in crude oil prices and the depreciation of the ringgit against the greenback, sent investors running to look for cover.
In the wake of fresh profit-taking liquidation, Bursa succumbed to tremendous stress to retreat from an intra-day high of 1,819.58 in early trade to finish down 13.78 points to 1,809.72, thus wiping out the previous day’s gains.
Thereafter, the local bourse turned sideways on consolidation amid dearth of compelling leads on the horizon, very much in line with most regional pattern while investors look at the Fed’s meeting minutes for an indication of the timing of rate hike in the United States.
In sluggish trade, the FBM KLCI flirted between an intra-day high and low of 1,812.59 and 1,807.95 respectively throughout, a very tight 4.64 points before ending up 0.39 of a point to 1,810.11.
Despite the positive close, the overall market breadth was negative, with losers beating winners by 413 to 341 in mid-week.
On the back of deteriorating market sentiment, Bursa resumed the downward correction after a brief respite and losses in the blue chips dragged the key index down a steep 15.07 points to 1,795.04 on Thursday.
It shed an additional 7.54 points to 1,787.50 on persistent selling yesterday, although the prospects for a rate hike in the United States in June was dimmed and crude oil prices jumped.
Statistics: Week-on-week basis, the principal index tumbled 24.42 points, or 1.3% to 1,787.50 yesterday, against 1,811.92 on May 15.
Total turnover for the week amounted to 10.247 billion shares worth RM9.933bil, versus 8.177 billion units worth RM8.948bil changing 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 after triggering a short-term sell near the overbought area in mid-week.
Similarly, the 14-day relative strength index hit a high of 54 on Monday before reversing down to finish at the 30-point level yesterday.
In addition, the daily moving average convergence/divergence (MACD) histogram resumed the downward expansion against the daily signal line to stay bearish. It had issued a sell late last month.
Weekly indicators worsen, with the slow-stochastic momentum index keeping the sell despite reaching the oversold area and the MACD on the verge of slipping below the signal line to trigger a sell signal.
Outlook: Bursa slipped back into correction mode, with the FBM KLCI reversing early strong advances to end the week easier in the wake of a fresh bout of liquidation pressure.
The overall market sentiment was decisively frail apparently. If the weakness prevails, the local bourse is bound to suffer, but we reckon any declines from here may be limited, with a record high Wall Street, a spike in crude oil prices, and a fairly firm regional equities, providing cushion and helping to neutralise the negative effects on the domestic front.
Based on the daily chart, the FBM KLCI had violated the 38.2% Fibonacci retracement (FR) of 1,793 during intra-week trading. Going forward, the key index may test the 50% FR of 1,770 on bearish extended-move, with the falling 21-day simple moving average pressuring the index before we see a steady recovery.
Lower support is resting at the 1,747 points, followed by the 1,700-point psychological level. Technically, indicators are fragile, suggesting more consolidation this week.
To the upside, a close above the 1,824 points stiff barrier would signal the end of the current correction phase.