Cautious mood prevails Saturday, 6 June 2015 By: K.M.LEE

by **Cals** Mon 08 Jun 2015, 03:34

Cautious mood prevails

Saturday, 6 June 2015
By: K.M.LEE

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REVIEW: Shares on Bursa Malaysia started out the week on a steadier note, with the FBM KLCI jumping 4.30 points to 1,751.82 in an initial trade, attempting to stage a relief recovery after the recent rout.
Sentiment was positive while blue chips led gains, taking comfort of a spike in crude oil prices, boosted by a big drop in the number of US oil rigs in operations.
But the momentum could not be maintained for long, as investors were unnerved by a plunge in the Dow the previous Friday and the mixed signals from Greece’s debt talks.
In addition, the depreciation of the ringgit against the greenback weighed on the market.Though major markets in the Asia-Pacific region climbed, it was not helping. Consequently, the key index reversed early gains to a low of 1,732.27 in mid-morning before turning sideways for the rest of the day, shedding 4.11 points to 1,743.41 on Monday.
Nevertheless, Bursa made another attempt to heal the next day, aided by a higher Wall Street overnight and crude oil prices holding firm at previous day’s level.
Again, it was not successful due to lack of support from the big boys, with equities outside China drifting lower on profit-taking activity and the local currency remaining frail.
In stark contrast, second and lower liners were mostly up on speculative plays and it was clearly reflected on the scoreboard.
Despite the FBM KLCI easing 2.04 points to 1,741.37, winners beat decliners by 571 to 262 on Tuesday.
After several futile attempts to recover, the local market finally inched higher on Wednesday, boosted by a rally in crude oil prices, and a stronger ringgit.
But there was still a sense of carefulness on the broad front, with a lower Dow and a subdued regional performance dampening investors’ enthusiasm.
In cautious session, the key index fluctuated between an intra-day low of 1,743.12 in the morning to a high of 1,750.68 in the afternoon before finishing up 7.80 points to 1,749.17 in mid-week, snapping a three-day losing streak.
After a short pause, Bursa tripped back into correction mode, shedding 7.69 points to 1,741.49 on lack of compelling leads on the horizon on Thursday but recovered 3.85 points to 1,745.33, largely aided by gains in certain quality issues yesterday.
Statistics: On a weekly basis, the principal index dropped 2.19 points, or 0.1% to 1,745.33 yesterday, against 1,747.52 on May 29.
Total turnover amounted to 7.367 billion units worth RM8.943bil, compared with 9.074 billion shares valued at RM11.636bil 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 rise after triggering a short-term buy at the very oversold area earlier of the week, but it appeared weakening near the mid-range.
The past week saw the 14-day relative strength index hitting a high of 27 in mid-week before retreating to settle at the 21-point level.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram retained the sell call, but the downward pressure had eased slightly. Weekly indicators were ugly, with the MACD expanding negatively against the signal line and the slow-stochastic momentum index showing no sign of reversing up despite reaching the grossly oversold position.
Outlook: Bursa swooned to a low of 1,732.27 on Monday, the worse level in almost 4½-month before attempting to stabilise, turning sideways on continuous selling alternated with bargain hunting interest.
Based on the daily chart, the local bourse has carved out a short-term descending channel, and as long as the index is trapped inside, nothing is going to change.
Meanwhile, on the home turf, investors were worries about a downgrade on Malaysia, poor corporate earnings, weakening of the local currency and falling crude oil prices.
On the external front, there were uncertainty in the eurozone, the spread of Middle East Respiratory Syndrome and the volatile global equities hurting sentiment.
With so many issues clouding the market place, we expect cautious mood to prevail in the short term.
Technically, indicators are weak, suggesting the local bourse will remain under pressure. Hence, any relief rebound due to oversold reason is not sustainable, unless strong catalyst emerges. Initial support is pegged at the 76.4% Fibonacci retracement (FR) of 1,718, followed closely by the 1,700-point psychological level, of which a crack may see the 100% FR of 1,671.82 becoming vulnerable.
To the upside, significant resistance can be expected at 1,770 points, which is the returning line of the existing downtrend channel,
A decisive breakout would see the fate of the market changing for the better, enroute to challenge the upper 21-day simple moving average of 1,780 points.