Daily FBM KLCI chart as at August 17, 2018.

Global markets indices and commodities performances as at August 17.

The FBM KLCI snapped a five-week gain last week as market started on take profits. The index declined 1.2 per cent in a week to 1,783.47 points last Friday, in line with global markets performances. Market data was slightly bearish.

Firstly, corporate results for the second quarter was rather mixed and secondly, Bank Negara has revised the 2018 GDP estimates downwards to five per cent from 5.5 per cent to six per cent. Furthermore, the ringgit continued to weaken against the US dollar.

Trading volume has slightly declined last week. The average daily trading volume fell to 2.3 billion shares from 2.4 billion shares two weeks ago. However, the average daily trading value has increased to RM2.4 billion from RM2.3 billion.

Foreign institutions started selling again after being net buyers in the past two weeks. Since the general election, foreign institutions were net sellers most of the time. Net buy sell from foreign institutions was RM631 million and net buys from local institutions and retail were RM485 million and RM146 million respectively.

In the FBM KLCI, decliner beat gainers four to one. The top three gainers were Hartalega Holdings Bhd (3.9 per cent in a week to RM6.86), Dialog Group Bhd (1.5 per cent to RM3.44) and PPB Group Bhd (0.7 per cent to RM16.90). The top three decliners were RHB Bank Bhd (7.1 per cent to RM5.09), Press Metal Aluminium Holdings Group Bhd (six per cent to RM4.70) and Malaysia Airports Holdings Bhd (five per cent to RM9.37).

Global markets were bearish last week except for the US. In Asia, the declined was led by China. Shanghai’s Stock Exchange Composite Index fell 4.5 per cent in a week to its lowest in 31 months. Hong Kong’s Hang Seng Index fell to a one-year low. European markets, including UK, were generally lower but the US Dow Jones Industrial average closed at its highest level in nearly six months last Friday.

The US dollar Index, which measures the US dollar against a basket of major currencies, pulled back from a one-year high last week but still near the high. The US dollar Index closed at 96.1 points last Friday as compared to 96.3 points the week before. The Malaysian ringgit weakened against the US dollar from RM4.08 two weeks ago to RM4.10 to a US dollar last Friday.

Major commodities prices fell last week. Gold (COMEX) fell to a 19-month low in the middle of last week and eventually closed 2.2 per cent lower in a week at US$1,191.80 an ounce last Friday. Crude oil fell to a four-month low. Brent crude oil declined 1.5 per cent in a week to $71.86 a barrel. Crude palm oil futures started on a bearish note but rebounded to close only 0.2 per cent lower in a week to RM2,238 per metric tonne last Friday.

After a steep decline last Monday, the FBM KLCI became directionless throughout the week. The index has found support at 1,774 points last week. The minor Fibonacci retracement level of the current short- term bullish trend is at 1,775 points. The immediate resistance level is at 1,811 points.

Technically, the FBM KLCI remained bullish above the short term 30-day moving average but has fallen below the long term 200-day moving average last week. The FBM KLCI is also above a thick cloud and this indicates good support for the bullish trend. In fact, the index is now sitting directly on the cloud.

The pullback caused momentum indicators to decline. The RSI and Momentum Oscillator indicators are declining but above their mid-levels. This indicates a weak bullish momentum in the short term. The MACD indicator has declined below its moving average.

Technically, the FBM KLCI is currently at the support level of a bullish trend. The index may rebound from this level to decline further for a bigger correction. Henceforth, if the FBM KLCI can stay above 1,774 points, the bullish trend may expand and climb towards historical as we have anticipated. However, a breakout below this level could bring the index down to the next support level at 1,735 points.

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al 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 advisor.