This article first appeared in The Edge Financial Daily on July 17, 2019
The market pulled back to a three-week low last week after climbing to its highest in four months two weeks ago. The local market performance was in line with most of the markets globally except for the US market which climbed to a historical high. This indicates weak market confidence and the FBM KLCI remained in the red year to date while other markets are in the black.
The KLCI declined 0.8% in a week to 1,669.45 points last Friday. The market was directionless this week and the index closed at 1,668.94 points yesterday.
Trading activity was lower last week as compared with the previous week. The average daily trading volume has declined to 2.7 billion shares last week from three billion shares the week before. The average daily trading value fell to RM2 billion from RM2.1 billion.
The stronger ringgit encouraged foreign buying last week. Net buy from foreign institutions was RM84.9 million. Local retail joined foreign institutions with a net buy of RM84.6 million. Therefore, net sell from local institutions was RM169.5 million.
For the KLCI, decliners beat gainers 11 to four. The top three gainers were Press Metal Aluminium Holdings Bhd (+1.6% in a week to RM4.39), Dialog Group Bhd (+0.9% to RM3.38) and PPB Group Bhd (+0.9% to RM18.74). The top three decliners were Petronas Dagangan Bhd (-3.3% to RM24.76), CIMB Group Holdings Bhd (-3.2% to RM5.20) and Genting Bhd (-2.7% to RM6.62).
Markets generally closed lower last week with the exception of the US market. The US Dow Jones Industrial Average and the S&P 500 Index rose to historical highs.
The US dollar has slightly weakened against major currencies. The US Dollar Index slightly declined to 96.7 points from 97.2 points two weeks ago. The ringgit strengthened to RM4.11 last Friday from RM4.13 two weeks ago.
Prices of commodities closed higher. Crude oil (Brent) increased 4% in a week to US$67 (RM275.37) a barrel last Friday, the highest since end May. Gold rose on weaker US dollar. Comex Gold increased 1.2% to US$1,417.80 an ounce. However, crude palm oil fell 0.7% in a week to RM1,944 per tonne, the lowest in nearly four years.
The KLCI fell below the immediate support level at 1,670 points last week and the next support level is at 1,657 points.
The index failed to test the 1,700-point psychological resistance level two weeks after it climbed above the long term 200-day moving average at 1,685 points. This indicates a weak market sentiment.
Technically, the KLCI trend remained bullish in the short term above the short-term 30-day moving average. However, there are signs of weaknesses in the bullish trend as the index fell below the short-term uptrend line and is now near the 30-day moving average. Furthermore, the index is now above the thin Ichimoku Cloud indicator and this indicates weak support in the uptrend.
Momentum indicators continued to decline and this indicates that the bearish momentum is gaining traction. The Relative Strength Index and Momentum Oscillator indicators are declining and are near their mid-levels. Furthermore, the Moving Average Convergence Divergence indicator has fallen below its moving average.
The technical indicators in the chart show signs of weakness in the bullish trend. Last week’s decline was an indication of a weak market sentiment despite expectation of the KLCI testing the psychological 1,700 points. Henceforth, we expect further declines in the index and may test the support level at 1,657 points and if the index is not supported at this level, further downward correction is expected. The next technical support level is at 1,640 points.
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.