KLCI to stay cautious ahead of ECB Meeting despite Wall Street rally

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KUALA LUMPUR (Nov 6): The FBM KLCI is likely to tread cautiously today ahead of the European Central Bank (ECB) meeting later in the day,despite the overnight rally at Wall Street.

U.S. stocks rose on Wednesday, with both the S&P 500 and Dow advancing to records, after Republicans took control of the Senate, allaying fears of drawn-out runoffs and raising investor hopes for more business- and energy-friendly policies, according to Reuters.

MSCI's all-country world stock index rose 0.31 percent. Stocks in Europe rose about 1.7 percent, helped by solid company results such as British retailer Marks & Spencer, whose shares surged 9.7 percent, it said.

Reuters reported some traders as saying the rally in Europe could be short-lived if European Central Bank chief Mario Draghi fails on Thursday to unveil new stimulus measures to spur growth in the struggling euro zone. Most euro zone bond yields edged up as investors questioned if the ECB can boost the region's flagging economy.
AllianceDBS Research in its evening note Wednesday said that dampened by the down close in the preceding day, the FBM KLCI had on Nov 5 gapped down to a low of 1,837.72 as market participants continued to play on the selling side in anticipation of a lower market. 
The research house said thhat in the absence of stronger buying interest, the benchmark index held its position near the low end throughout most of the trading sessions before settling near the day’s low at 1,839.29 (- 8.07 , - 0.44%).   
“In the broader market, losers outnumbered gainers with 576 stocks ending lower and 251 stocks finishing higher. That gave a market breadth of 0.43 indicating the bears were in control,” it said.

AllianceDBS Research said the benchmark index made lower low for 2 consecutive days on Nov 5, and this gave a total of 3 down close over the past 3 days.

It said sellers were again in better control over the buyers in the game play.

It added that the higher market volume along with the down close on Nov 5 was due to profit taking activity as the benchmark index had chalked up 92 points or 5.20% measuring in 11 days from the low of 1,766 (17 Oct 2014) to the high of 1,858 (3 Nov 2014).

It said following the down close, the market is likely to trade lower with immediate support remains at 1,838.

AllianceDBS Research said a fall below 1,838 would put pressure on the market down to the subsequent support at 1,830.

It said that indicator wise, the MACD was still above the 9-day moving average line. 

“The analysis of overall market action on Nov 5 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,837.72 level on Nov 6,” it said.