Global markets continued to rise last week and this provided some confidence in the local market. The FBM KLCI rose to its highest level in a month. The market was also supported by higher crude oil and palm oil prices. However, institutional participation continued to be weak.

The benchmark index increased 0.5% in a week to 1,692.22 points last Friday on a relatively lower trading volume. The market continued to rise this week and closed at 1,702.12 points yesterday.

Trading volume was weaker. The average daily trading volume fell to 2.6 billion from 2.9 billion shares in the previous week. However, the average daily trading value declined to only RM1.9 billion from RM2.5 billion. This indicates that more lower-capped stocks, which are favoured among the retail market, were being traded.

Local institutions remained net sellers last week and the market was supported by foreign institutions and local retail participants. Net buying from foreign institutions and local retailers were RM429.7 million and RM50 million respectively. Net selling from local institutions was RM479.7 million.

For the KLCI, gainers beat decliners 21 to eight. The top three gainers were Dialog Group Bhd (+8.3% in a week to RM3.12), Westports Holdings Bhd (+6.2% to RM3.93) and Genting Bhd (+5.3% to RM6.79). The top three decliners were Press Metal Aluminium Holdings Bhd (-4.3% to RM4.45), Petronas Dagangan Bhd (-3.9% to RM25) and Sime Darby Bhd (-2.5% to RM2.30).

Global markets continued to climb higher last week. However, the KLCI has been unchanged year to date, while other markets have risen at least 4%. This shows that local market sentiment is weaker.

After a few weeks of decline, the US Dollar Index increased to 96.4 points last Friday from 95.7 points in the previous week. This shows that the US dollar is slightly strengthening against major currencies. Hence, the ringgit weakened to RM4.11 against the US dollar compared with RM4.10.

As confidence in the equity markets grew, gold prices started to weaken. Commodity exchange gold snapped a four-week gain and declined 0.5% in a week to US$1,281.15 (RM5,291.15) an ounce last Friday. Crude oil (Brent) remained bullish for the third week as the price increased 3.4% to US$62.62 per barrel. Crude palm oil (BMD) increased 0.5% to RM2,223 per tonne last Friday.

The KLCI was moving towards the resistance level at 1,702 points, and this indicates that market sentiment is gaining some confidence. The index is likely going to test this level this week if it is able to stay above the immediate support level at 1,667 points.

Technically, the KLCI is bullish above the short-term 30-day moving average. It is now moving into the Ichimoku Cloud indicator and has to climb above 1,705 points to overcome the cloud and turn bullish.

After whipsawing in the past few weeks, the momentum indicators finally show signs of bullish sentiment strengthening. The Relative Strength Index and momentum oscillator climbed to multi-week highs and the moving average convergence divergence turned bullish.

It is still early to confirm that the market has turned bullish. It is now in a reversal. Stronger market sentiment can only be supported if the KLCI can stay above the immediate support level at 1,667 points. The index may test the resistance level at 1,702 points and if it breaks above this level, then we may see a rally in the market and the KLCI to test the next resistance level at 1,750 points based on the long-term 200-day moving average.

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 licenced investment advisor.