Last week, the FBM KLCI traded in a directionless manner on a technical support level. However, the index fell slightly below the support level of 1,680 points last Friday and closed lower for the second week. Market confidence has been affected by the continuous selling pressure from foreign institutions.

The KLCI fell 1.2% in a week to 1,690.9 points last Friday, the lowest in nearly two months. The index continued to fall this week and closed at 1,671.28 points yesterday.

The average daily trading volume increased to 3.1 billion shares last week compared with 2.7 billion in the previous week. The average daily trading value rose to RM2.7 billion from RM2.5 billion. This indicated more lower-capped counters were being traded.

Selling pressure from foreign institutions intensified last week. Net sell from foreign institutions was RM709.9 million. Net buys from local institutions and retail investors were RM667.4 million and RM42.5 million respectively.

For the KLCI, decliners continued to dominate gainers 18 to five. The top three gainers were Westports Holdings Bhd (+3% in a week to RM3.75), Press Metal Aluminium Holdings Bhd (+2.9% to RM4.32) and IHH Healthcare Bhd (+1.6% to RM5.88). The top three decliners were CIMB Group Holdings Bhd (-5.1% to RM5.39), Malaysia Airports Holdings Bhd (-4.6% to RM7.75) and Hartalega Holdings Bhd (-2.9% to RM4.99).

The bearish performance in the local market was in line with global market performances. The best performing market index this year, the Shanghai Stock Exchange Composite Index, snapped an eight-week gain to close lower last week. Most other markets pulled back from their multi-week or multi-month highs.

The US dollar strengthened last week. The US dollar index, which measures the US dollar against a basket of major currencies, increased to 97.4 points last Friday from 96.4 points in the previous Friday. The ringgit weakened against the US dollar from RM4.08 two weeks ago to RM4.09 to a US dollar last Friday.

Prices of major commodities were mixed. Price of Commodity Exchange gold increased only 0.3% in a week to US$1,298.75 (RM5,298.90) an ounce last Friday. Crude oil (Brent) rose 1.1% to US$65.69 per barrel. Locally, crude palm oil (BMD) fell for the fifth week, declining 2.9% in a week to RM2,126 per tonne.

The KLCI fell below the psychological support level of 1,700 points. The next support level would be at 1,630 points. The immediate technical resistance level is at 1,730 points.

Technically, the KLCI turned bearish as it fell below the short-term 30-day moving average. However, the index was above the Ichimoku Cloud indicator and was at its reversal point. Henceforth, the market is either going to rebound or decline further.

Momentum indicators turned bearish last week. The Relative Strength Index and Momentum Oscillator fell below their mid levels and were declining. The Moving Average Convergence Divergence indicator continued to decline below its moving average. This indicated that the trend was turning bearish and the momentum was gaining traction.

With the breakout of the support level and bearish technical indication, the KLCI is expected to decline further. The index may decline and find support at 1,630 points if it fails to rebound and climb above 1,690 points, the highest in the past one week.

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 investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.