KUALA LUMPUR (Aug 6): The FBM KLCI is expected to trend upward and hover around the 1,730-level today, in line with the overnight uptick at most global markets.
Global equities markets rose on Wednesday on data showing the pace of growth in the US service sector surged in July to a decade high, as well as being boosted by solid corporate results in Europe, while the dollar teetered as investors gauged the likelihood of a September interest rate hike, according to Reuters.
The US Institute for Supply Management's services sector index rose to 60.3, its highest reading since August 2005, on sharp increases in business activity, employment and new orders. It beat expectations for a 56.2 reading. A reading above 50 indicates growth, it said.
AllianceDBS Research in its evening edition Wednesday said the FBM KLCI had on August 5 opened on a positive note as market participants chose not to stage an immediate follow through selling pressure.
The research house said the benchmark index subsequently traded to a high of 1,729.91 to form an inside day bar before settling at 1,725.56 (+1.83, +0.11%).
“In the broader market, losers outnumbered gainers with 388 stocks ending lower and 383 stocks finishing higher. That gave a market breadth of 0.98 indicating the bears were in control,” it said.
AllianceDBS Research said while the market did not witness a follow through selling pressure on August 5; however, there was an inside day bar within previous day’s range.
“This gave rise to a formation of a double inside day setup. This means that the market is still in a consolidation mode.
“With the double inside day bar set-up, the market is seen gearing into a more volatile move soon.
“Given the way this market carried itself in the last few days, the benchmark index is expected to stay between 1,714 and 1,739 for a short moment before a breakout occurs,” it said.
The research house said a breakdown of 1,714 would put pressure on the market down to the subsequent support at 1,706.
“Conversely, an upside breakout of 1,739 could see the market moving towards the next hurdle at 1,760,” it said.
The research house said that indicator wise, the MACD was above the 9-day moving average line.
“The analysis of overall market action on August 5 revealed that buying power was stronger than selling pressure.
“As such, the FBM KLCI would likely trade above the 1,729.91 level on August 6,” said AllianceDBS Research.