This article first appeared in The Edge Financial Daily, on October 28, 2015.

The FBM KLCI pulled back below 1,700 points two days after the Budget was tabled as there were no strong catalysts to propel the market higher despite bullish global market performances. As I mentioned two weeks ago, the market is due for a correction after two months of bullish rally.

China’s weak growth remained a concern. However, the market actually moved sideways in the correction instead of a bearish one and this shows that it is still being supported. The FBM KLCI declined only 0.5% in a week to 1,696.95 points yesterday.

The ringgit has slightly strengthened against the US dollar. The ringgit strengthened from RM4.28 last week to 4.26 to a US dollar yesterday. Foreign institutions continued to be the main support.

Trading volume in the past one week was lower compared with the previous week. The daily average volume last week (Monday to Friday) was 2.3 billion shares compared with 2.5 billion shares two weeks ago. However, average trading value continued to decline from RM2.3 billion two weeks ago to RM2 billion last week. Lower liners were now being the focus as blue chips took a breather.

From last Monday to Friday, net buying from foreign institutions was RM230 million and net selling from local institutions and local retail were RM158 million and RM72 million respectively.

For the FBM KLCI, decliners outpaced gainers four to three. The top gainers were Genting Bhd (+3.9% from last week), Kuala Lumpur Kepong Bhd (+2.7) and IOI Properties Group Bhd (+2.4%). Top decliners were DiGi.com Bhd (-7.0%), Hong Leong Financial Group Bhd (-2.5%) and Axiata Group Bhd (-1.7%).

Markets in Asia were bullish for the third week. However, these markets started to pull back in the past two days and erased most gains. China’s Shanghai Stock Exchange Composite rose 0.3% in a week to 3,434.27 points. Japan Nikkei 225 index increased 3.1% in a week to 18,777.04 points. Hong Kong’s Hang Seng Index increased 0.7% to 23,142.73 points and Singapore’s Straits Times rose 1.1% to 3,052.53 points.

Markets in the US and Europe rallied last week. On Monday, the US Dow Jones Industrial Average increased 2.3% in a week to its two months high at 17,623.05 points on a stronger US dollar. Germany’s DAX Index jumped 6.1% to 10,794.54, also at its highest in two months, while London’s FTSE100 rose 1.1% in a week to 6,417.02 points.

The US dollar strengthened and this weighed down gold and oil prices. The US Dollar Index futures increased marginally from 95 points a week ago to 97 points on Monday. COMEX gold price declined 1% in a week to US$1,162.90 (RM4,919.06) an ounce. WTI crude oil fell 6.1% in a week to US$43.73 per barrel on glut worries. Crude palm oil on Bursa Malaysia was firm at RM2,320 per tonne.

Despite the correction in the past two weeks, the FBM KLCI remained in a bullish trend. Technically, the index is bullish above the short-term 30-day moving average and the Ichimoku Cloud indicator. The short-term 30-day moving average is now at 1,668 points. However, the bullish momentum remained weak as the market continued to face resistance.

The RSI, MACD and Momentum Oscillator indicators continued to decline indicating weak momentum. The Stochastic indicator has pulled back below its overbought level and this indicates a reversal. Furthermore, the index is now near the middle band of the Bollinger Bands indicator. All these indicate that the market is still in a correction.

The market remained directionless. The FBM KLCI is currently at the support level of the sideways correction in the past two weeks. However, a decline below the support level at 1,695 points could trigger further selling pressure and the index may fall to the next support level at 1,650 points. If it stays above this level, continue to expect the market to be directionless this week.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at [email protected]. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.