Sentiment weak, market may continue to stay directionless

TheEdge Wed, Jan 16, 2019 10:57am - 5 years View Original


The FBM KLCI rebounded as expected last week but was not able to rally and ended up closing marginally higher. The increase was in line with global market performances. The index increased 0.8% in a week to close at 1,683.22 points last Friday on significantly higher trading volume. Yesterday, the index closed at 1,679.42 points.

The market trading volume started to gain traction after the new year’s break. The average daily trading volume rose to 2.9 billion from 1.9 billion shares in the previous week and the average daily trading value rose to RM2.5 billion from RM1.2 billion.

The market was supported by foreign institutions and local retail investors this time. Net buys from foreign institutions and local retail investors were RM111.9 million and RM74.4 million respectively. Net sell from local institutions was RM186.3 million.

For the KLCI, gainers outpaced decliners 19 to 11. The top three gainers were Genting Bhd (+8.8% in a week to RM6.45), Genting Malaysia Bhd (+7.6% to RM3.27) and Axiata Group Bhd (+5.5% to RM4.01). The top three decliners were Hartalega Holdings Bhd (-17.5% to RM5.06), Top Glove Corp Bhd (-13.4% to RM4.80) and Petronas Chemicals Group Bhd (-6.1% to RM8.70).

Global markets were generally bullish for the second week since the beginning of this year. In Asia, Singapore led the pack as the Straits Times Index increased 4.6% in a week to its highest level in three months. European, UK and US markets closed higher as well but not as strong as the Asian markets.

The US dollar continued to weaken against major currencies last week. The US Dollar Index (which measures the US dollar against a basket of major currencies) declined to 95.7 points last Friday from 96.2 points in the previous week. Hence, the ringgit

strengthened to RM4.10 against the US dollar compared with RM4.13. It was the strongest in nearly five months.

In the commodity markets, gold continued to be supported on equity market uncertainties. Gold (Comex) increased 0.1% in a week to US$1,287.90 (RM5,280.39) an ounce last Friday. Crude oil (Brent) continued its bullish momentum for the second week and increased 5.5% to US$60.59 per barrel. Crude palm oil rose only 0.1% to RM2,173 per tonne last Friday.

Despite the increase, the market was mostly directionless last week. The KLCI traded between 1,667.83 points and 1,687.13 points. The index failed to test the resistance level of 1,702 points and this indicated a lack of confidence. However, the index was also not bearish.

Technically, the KLCI was directionless as it whipsawed against the short-term 30-day moving average in the past two weeks. However, the market trend is still bearish as the moving average is declining and the index is below the long-term 200-day moving average and Ichimoku Cloud indicator.

Momentum indicators continued to be mixed. The Relative Strength Index and Momentum Oscillator rose above their mid levels but the whipsaw against their mid levels indicated a lack of momentum from both bearish and bullish strength. However, the moving average convergence divergence indicator was still above its moving average.

In the last article, I mentioned that if the index failed to climb above the resistance level of 1,700 points, the trend shall remain bearish. Based on the market performance in the past two weeks, the KLCI is expected to be directionless and probably even test 1,700 points. Like last week, the index may fall further if it fails to climb above the resistance level.


The above commentary is solely used for educational purposes and is the contributor’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.

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






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