KLCI to remain cautious despite positive close at global markets

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KUALA LUMPUR (Nov 12): The FBM KLCI could trade range-bound today and remain cautious despite the positive close at both Wall Street and European markets.

U.S. stock prices held steady on Tuesday after the Dow and Standard & Poor's 500 hit record intraday highs for a fifth straight session, while the dollar rose against the yen on the prospect of a delay in a planned sales tax hike in Japan, according to Reuters.

Oil prices fell further on the stronger dollar and robust output from U.S. shale fields, with Brent crude dropping to a four-year low below $82 a barrel, it said.

European shares were boosted by positive corporate results. The pan-European FTSEurofirst 300 index closed up 0.3 percent, as strength in telecoms stocks offset a fall in Italian shares, said Reuters.

AllianceDBS Research in its evening edition Tuesday said the FBM KLCI had on Nov 11 traded marginally higher to 1,832.70 after the opening bell as some market participants chose to play a buying game.

“However, non-follow through supportive buying at 1,832.70 prompted selling interest to kick in. This pushed the benchmark index down to a low of 1,823.27 before settling at 1,825.11 (- 2.82, - 0.15%).

“In the broader market, losers outnumbered gainers with 625 stocks ending lower and 241 stocks finishing higher. That gave a market breadth of 0.38 indicating the bears were in control,” said the research house.

AllianceDBS Research said the higher high followed by the lower low on Nov 11 indicated that sellers were in control.

It said buyers were reluctant to make a stronger commitment at this juncture as the market was still seen searching for a stabilisation level.

It said given the down close, the benchmark index is likely to trade lower again.

“And, a fall below 1,822 level would put pressure on the market down to the subsequent support at 1,812 [50% retracement],” it said.

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

 “The analysis of overall market action on 11 Nov 2014 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,823.27 level on Nov 12,” it said.