This article first appeared in The Edge Financial Daily on October 24, 2018
The market rebounded as expected after the FBM KLCI found support at 1,683 points in the selldown two weeks ago. The local market’s performance was in line with global markets’, which have also rebounded from a bearish market. The KLCI increased only 0.1% in a week to close at 1,732.14 points last Friday in a mostly directionless week. The market fell this week and closed at 1,697.6 points yesterday, the lowest in three months.
Market sentiment was weak and hence the decline in market activity. The average daily trading volume decreased to two billion shares from 2.5 billion in the previous week and the average daily trading value fell to RM2.1 billion from RM2.5 billion.
Foreign institutions were net sellers as ringgit weakened. Net sell from foreign institutions was RM129 million while net buys from local institutions and local retail were RM120 million and RM9 million respectively.
For the KLCI, gainers beat decliners two to one. The top three gainers were Genting Bhd (+3.5% in a week to RM7.44), Genting Malaysia Bhd (+3.2% to RM4.49) and MISC Bhd (+2.9% to RM5.73). The top three decliners were Telekom Malaysia Bhd (-7.3% to RM2.41), Axiata Group Bhd (-5.1% to RM3.71) and IHH Healthcare Bhd (-4.3% to RM4.96).
Global markets’ performances were weak. Markets in Asia fell while US and European markets rebounded. Shanghai Stock Exchange Composite Index fell to its lowest in nearly four years last week and Hong Kong’s Hang Seng Index fell to a year’s low. Markets in the US and Europe including UK rebounded and closed marginally higher from the previous week.
US dollar has slightly strengthened against major currencies. The US Dollar Index (which measures the US dollar against major currencies) increased to 95.6 points last Friday from 95.2 points the week before. The ringgit weakened slightly against the US dollar at RM4.16 to a US dollar compared with RM4.15 in the previous week.
Commodity prices were directionless. Price of gold on the commodity exchange rose 0.7% in a week to US$1,230 (RM5,116.80) an ounce. Brent crude oil fell 0.5% to US$80.02 a barrel. Locally, crude palm oil futures fell 1.3% to RM2,222 per tonne.
The index rebounded from the immediate support level of 1,683 points two weeks ago in the downtrend but failed to overcome the immediate resistance level of 1,755 points based on the 50% Fibonacci retracement level of the immediate downtrend. This shows that the market is still not out of the bearish trend.
Technically, the KLCI trend is bearish below both the short- and long-term 30- and 200-day moving averages. Furthermore, the index remained below the Ichimoku Cloud indicator after failing to climb above the lower band of the Ichimoku Cloud indicator.
Momentum indicators rebounded but failed to turn bullish. Momentum indicators like the Relative Strength Index and Momentum Oscillator failed to climb above their mid levels and are starting to decline. The moving average convergence divergence indicator remained below its moving average or trigger line. This indicates that the bearish trend momentum is strengthening.
The KLCI trend turned bearish two weeks ago after breaking below the support level of 1,780 points. Today, the trend is still bearish and is expected to remain bearish if the index continues to stay below the immediate resistance level of 1,755 points. If it fails to break above this resistance level, the index may test the support level of 1,683 points and may even fall below this level towards the next support level of 1,660 points.
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.