KLCI could inch up cautiously, gains seen limited on external factors

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NEW YORK (March 27): The FBM KLCI could inch up cautiously today and remain above the crucial 1,800-point level, although gains are seen limited given the escalating Middle Eastern tensions and lower overnight close at Wall Street.

Oil prices jumped 5 percent and stock markets worldwide slumped on Thursday after Saudi Arabia and allies carried out air strikes in Yemen, which fueled worries in the Middle East that energy shipments may be put at risk, according to Reuters.

Wall Street steadied in late trading, narrowing losses that had been as much as 1 percent to close just modestly lower with support from economic data and corporate earnings reports, it said.

Wall Street's Dow Jones industrial average closed off 40.31 points, or 0.23 percent, to 17,678.23, the S&P 500  lost 4.9 points, or 0.24 percent, to 2,056.15 and the Nasdaq Composite dropped 13.16 points, or 0.27 percent, to 4,863.36, said Reuters.

AllianceDBS Research in its evening edtion Thursday said despite the up close in the preceding day, the FBM KLCI had on March 26 formed an inside day bar as market participants chose not to stage follow through buying support.

It said that in the absence of either strong buying or selling interest, the benchmark index kept its position in a tight range throughout the trading sessions before settling at 1,818.42 (-0.68 , -0.04%).

“In the broader market, gainers outnumbered losers with 426 stocks ending higher and 397 stocks finishing lower. That gave a market breadth of 1.07 indicating the bulls were in control,” it said.

AllianceDBS Research said the inside day bar indicated a pause in the game play.

It said the lower high on March 26 suggested that those market participants that had lifted the market on March 25 became cautious about buying further into the market.

“In fact, the market should have traded higher with an eye to test the 1,826 hurdle on March 26 after the positive settlement above the 1,815 level on March 25.

“A crossover of 1,826 should see the benchmark index gearing towards the next hurdle at 1,830. However, a fall back below 1,815 could send the benchmark index down to the subsequent support zone, 1,795 – 1,800,” it said.

Indicator wise, the MACD is above the 9-day moving average line, it said.

“The analysis of overall market action on March 26 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,820.52 level on March 27,” said AllianceDBS Research.