KLCI could edge up cautiously, but gains likely capped

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KUALA LUMPUR (Nov 7): The FBM KLCI could edge up today, but gains are likely to be capped as sellers are seen to be still in control at the local market, despite the firmer overnight close at Wall Street.

Stocks on world markets were mixed, though Wall Street rose in a volatile session, with the Dow and S&P 500 hitting record closing highs a day ahead of the U.S. government's employment report for October, according to Reuters. U.S. stocks edged up in a volatile session on Thursday, with the Dow and S&P 500 hitting fresh record closing highs on an indication that the European Central Bank would take more policy action if needed to boost a struggling euro zone economy, it said.

AllianceDBS Research in its evening edition Thursday said the FBM KLCI had on Nov 6 broken below the expected 1,838 support to reach a low of 1,830.21 as market participants continued to play on the selling side in anticipation of a lower market.

It said that in the absence of stronger supportive buying interest, the benchmark index kept its position near the low end throughout most of the trading sessions before settling near the day’s low at 1,831.98 (- 7.31 , - 0.40%).  

“In the broader market, losers outnumbered gainers with 436 stocks ending lower and 364 stocks finishing higher. That gave a market breadth of 0.83 indicating the bears were in control,” it said.

The research house said sellers were still in control of the game play on Nov 6 as the benchmark index extended its losses for 4 consecutive days.

It said following the downside penetration of the 1,838 support, the market was expected to find its immediate support at 1,830.

It said the benchmark index had retraced 27 points (1,858 minus 1,831) over the past 4 days, this translated into a 29.3% decline of the rise from 1,766 (17 Oct 2014) to 1,858 (3 Nov 2014).

However, an inability of the benchmark index to protect its fort at 1,830 would put pressure on the market down to 1,822 (38.2% retracement from 1,766 to 1,858), it said.

“Indicator wise, the MACD is still above the 9-day moving average line.

“The analysis of overall market action on Nov 6 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,830.21 level on Nov 7,” it said.