Downtrend likely to continue

by **Cals** Sun 15 May 2016, 18:27

Saturday, 14 May 2016

Downtrend likely to continue

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REVIEW: Despite starting the week 1.99 points below the flat line, Bursa Malaysia’s benchmark the FBM KLCI drifted higher shortly after in an attempt to recover following the recent dip, tracking gains in Wall Street overnight, as the latest soft US jobs report offered investors hopes that the Federal Reserve would keep interest rate steady.
However, the positive momentum was quick to fizzle out as persistent foreign selling in the blue chips dampened investors’ early enthusiasm.
Poorer-than-expected trade figures filtered out from China, uninspiring performance of stocks in the Asia-Pacific region and the ringgit depreciating against the US dollar were not helping.

Consequently, the local bourse succumbed to tremendous stress to reverse earlier gains to settle broadly lower, slumping a hefty 17.17 points to 1,632.19, also the day’s ebb in sluggish session on Monday, thus carving out a bearish sign, which usually would open the doors for more weakness in the short term.
Overnight Dow turned lower the following day, dragged down by energy shares after crude oil prices tumbled a hefty US$1.22, or 2.8% to US$43.44 on news the wildfires in Canada had moved away from production facilities.
In the absence of new leads on the horizon, the local bourse kicked off on a soft note, with the key index shedding 3.29 points to 1,628.90 on Tuesday,
Sentiment was frail and very quickly, the market swooned to a three-month low of 1,614.40 and risked suffering more beatings.
While foreign funds were in dumping mood, the local institutional players flocked back to the blue chips and that somewhat helped Bursa Malaysia to reverse early losses to end slightly steadier, up 3.65 points to 1,635.84 on Tuesday.
Following a sudden swing in the overall underlying sentiment from negative to positive, Bursa Malaysia sustained a recovery process despite some hiccups in early hours on Wednesday as the local big boys dominated the floor, snapping up quality issues, riding on the strength of a triple-digit rebound in the US markets overnight.
A steadier performance in Asian equities and an uptick in the local currency against the greenback added to the upbeat mood.
In a good day like this, the FBM KLCI firmed from an intra-day low of 1,630.42 in the morning to a high of 1,646.96 in the afternoon before trimming gains slightly to close at 1,644.58, up 8.74 points in mid-week.
After a strong rally, Wall Street reversed trend owing to an apparent profit-taking activity and in the Asia-Pacific region, most markets eased, tracking the Dow overnight.
The local bourse reacted accordingly initially, with the FBM KLCI falling to a low of 1,639.17 in early business, but like the previous two days, it managed to claw back slowly in the afternoon on bargain hunting, taking comfort of a rally in crude oil prices, to finish up 4.40 points to 1,648.98 on Thursday.
And yesterday, Bursa Malaysia snapped its three-day winning streak, losing 20.72 points to 1,628.26, as investors booked profits on lack of buying incentives, with an uninspiring overseas performance weighing on the local sentiment, exacerbated by domestic news about GDP grew at its slowest quarterly pace since the third quarter of 2009.
Statistics: For the week, the principal index declined 21.20 points, or 1.3% to 1,628.26 yesterday, against 1,649.36 on May 6.
Weekly turnover stood at 8.861 billion shares amounted to RM10.106bil, compared with 6.369 billion units worth RM7.313bil traded the prior week.
Outlook: Bursa Malaysia extended its correction mode, with the FBM KLCI dropping for the fourth consecutive week as a steep rebound during intra-day session over the past three days from Tuesday to Thursday due to oversold reason was met with more liquidation.
Though crude oil prices continued to mend, it was not helping much this time around.
Apparently, the falling 14-day and the 21-day simple moving average (SMA) lines were pressuring the index. In addition to earlier negative crossings of these two lines against the 50-day SMA, the latest fall of the 14-day SMA below the 100-day SMA and the 200-day SMA would certainly make it harder for the bulls to strike back.
Until we see a strong catalyst emerges and guided the bulls to a clear breakout of the 14-day SMA and the 21-day SMA lines, resting at approximately 1,660 points and 1,680 points, Bursa Malaysia will probably stay in correction mode for a while.
Elsewhere, technical indicators such as the daily moving average convergence/divergence (MACD) histogram, which resumed the negative expansion against the daily trigger line, is bearish.
Combined with the latest sell signal on the weekly MACD, they suggest the local bourse is likely to sustain the downward momentum this week.
A slip below this year’s low of 1,600.92 may drag the index down to the 1,568-1,570-point area.