The FBM KLCI ended with a two-and-a-half-year high last Friday with a 9.4% increase year-on-year. December was a strong bullish month as the market was window-dressed until the last minute last Friday. The performance in December alone overcame the decline in the second half of 2017. The FBM KLCI increased 2.1% in a week to 1,796.81 points, after a 14-point jump in the last second of trading last Friday. The FBM KLCI closed at 1,792.79 points yesterday.

Trading volume was higher last week but the trading value dropped. The average daily trading volume increased to 2.6 billion shares from 2.5 billion shares two weeks ago. The average daily trading value fell to RM2.2 billion from RM2.5 billion two weeks ago, an indication of lower participation from institutions.

Foreign institutions were net buyers last week, presumably on a stronger ringgit. Net buying from foreign institutions was RM165 million, while net selling from local institutions and local retailers was RM23 million and RM142 million respectively.

Last week, gainers beat decliners 13 to two on the FBM KLCI. Top gainers for the week were KLCC Properties & REITS — Stapled Securities Bhd (+10.2% to RM8.64), Press Metal Bhd (+7.4% to RM5.39) and DiGi.com Bhd (+6.3% in a week to RM5.10). Top decliners were Telekom Malaysia Bhd (-3.1% to RM6.30), Westports Holdings Bhd (-1.1% to RM3.70) and Hap Seng Consolidated Bhd (-0.5% to RM9.55).

Global markets were mixed last week. In Asia, Hong Kong rose to near historical highs but Japan’s Nikkei declined. The US Dow Jones Industrial Average fell along with most European markets. However, London’s FTSE continued to climb to historical highs.

The US dollar weakened. The US Dollar Index fell to 92.3 points last Friday from 93.3 points a week before. The ringgit strengthened against the US dollar and closed at RM4.04 against the greenback last Friday from RM4.08 the week before.

Prices of major commodities continued to increase. Crude oil (Brent) increased 2.4% in a week to US$66.62 (RM267.81) per barrel. The Commodity Exchange gold price climbed to a three-month high last week and closed 2% higher at US$1,305.10 an ounce. Crude palm oil futures rebounded and increased 1.6% in a week to close at RM2,498 per tonne last Friday.

The FBM KLCI is strongly bullish above the short- and long-term 30- and 200-day moving averages. The index has also climbed strongly above the Ichimoku Cloud indicator. In fact, all trend indicators on the chart are showing strong bullish trends.

Momentum indicators like the Relative Strength Index, moving average convergence divergence and momentum oscillator also indicate strong bullish momentum. Furthermore, the Bollinger Bands are expanding; the index is trading at the top band. The Average Directional Index indicator is also rising, indicating good bullish momentum. However, these oscillators are also indicating that the index is getting overbought.

There is a clear indication that the FBM KLCI is in a bullish trend. However, we expect a correction for the FBM KLCI after a one-month rally. Furthermore, the last-minute increase last Friday was too superficial and the futures market was not convinced. The FBM KLCI futures closed at a 11-point discount against the index last Friday at 1,785 points.

We expect a rough start this year but the bullish trend should continue. The FBM KLCI is at a 2.5-year high and technically the chart should indicate a strong bullish trend and therefore the index is expected to climb higher. However, we expect some correction for the one-month rally and the index could pull back to the support level between 1,760 and 1,770 points. The index may continue its bullish trend to record highs this year if it can stay above the support level.

The above commentary is solely used for educational purposes and is the writer’s point of view using technical analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.