KUALA LUMPUR (Oct 23): The FBM KLCI is expected to trend sideways but defend its 1,700-point level today in line with the overnight uptick at most global markets, ahead of the tabling of Budget 2016 by Prime Minister Datuk Seri Najib Razak at 4pm Friday.

Stocks rose in the United States and Europe and the dollar hit a three-week high against the euro after European Central Bank President Mario Draghi said further rate cuts were being considered to stimulate the euro zone economy, according to Reuters.

The ECB, as widely expected, took no new steps on Thursday, but Draghi signaled that it could extend its 1 trillion euro bond-buying quantitative easing program if necessary to combat weak inflation, it said.

AllianceDBS Research in its evening edition Thursday said that led by the up close in the preceding day, the FBM KLCI had on Oct 22 traded marginally higher to 1,711.39 as some market participants continued to play on the buying side.

However, it said weak follow through buying support in the area of 1,711.39 prompted profit taking activity which pushed the benchmark index down to 1,701.69 before settling at 1,705.09 (down 2.02 points or 0.12%).

“In the broader market, losers outnumbered gainers with 456 stocks ending lower and 419 stocks finishing higher. That gave a market breadth of 0.91 indicating the bears were in control,” it said.

AllianceDBS Research said the marginal higher high indicated the unwillingness on the part of market participants to play an aggressive buying game on Oct 22 although the market may have been trading above the 1,700 level on close basis since Oct 9.

“Apparently, the small trading range between 1,700 and 1,730 for 9 days was not seen ideal for market participants to hang onto their stock positions because the present market trading environment was generally perceived to be in need of a positive catalyst to move upward again.

“The resistance and support are pegged at 1,716 and 1,695 respectively.

“A rise above 1,716 could send the market to the next hurdle at 1,730,” it said.  

AllianceDBS Research however said a fall below 1,695 would put pressure on the market down to the subsequent support at 1,680, adding that indicator wise, the MACD was above the 9-day moving average line.

“The analysis of overall market action on Oct 22 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,711.39 level on Oct 23,” said AllianceDBS Research.