KLCI likely to trend lower on weaker buying sentiment

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KUALA LUMPUR (Nov 4): The FBM KLCI is likely to trend lower today as subdued buying sentiment, lack of fresh leads at the local market and teh flat overnight close at Wall Street could keep investor sentiment on tenterhooks.

The S&P 500 and the Dow closed with slight losses on Monday after briefly touching intraday records, but strength in semiconductors boosted the Nasdaq, according to Reuters.

Monday's subdued trading followed the Dow's biggest weekly gain since January 2013 and the S&P's biggest two-week jump since December 2011. Gains in recent weeks have largely come on the back of strong quarterly results, which have eased concerns over how corporations are faring in an uncertain global economy, it said.

AllianceDBS Research in its evening edition Monday said that led by the up close in last Friday, the FBM KLCI had on Nov 3 traded higher to 1,858.09 as some market participants continued to play on the buying side in anticipation of a higher market.

“However, non-follow through buying at the 1,858.09 level prompted profit taking activity. This pushed the benchmark index down to 1,848.25 before settling at 1,853.34 (- 1.81, -0.10%).  

“In the broader market, losers outnumbered gainers with 449 stocks ending lower and 422 stocks finishing higher. That gave a market breadth of 0.94 indicating bears were in control with the bulls closely matched,” it said.

The research house said the down close was not much of a surprise as the market was in the overbought zone, and the market had also been trading along a slippery upward slope since Oct 17 with immediate hurdle at 1,860.

It said the recent minor rally from the low of 1,766 (17 Oct 2014) has resulted in an imbalanced demand – supply relationship.

“A small pullback is necessary in order to avoid an overheated situation,” it said.

AllianceDBS Research said given the down close on 3 Nov 2014, the benchmark index should test lower level in the coming few days with support pegged at 1,838.

“However, a downside penetration of 1,838 could send the market down to the subsequent support at 1,830.

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

“The analysis of overall market action on 3 Nov 2014 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,848.25 level on Nov 4,” it said.