This article first appeared in The Edge Financial Daily on October 16, 2019

The FBM KLCI was firm last Friday, compared with the previous week, and was against the global market trend. The market was cautious ahead of the tabling of Budget 2020 last Friday. The decline indicated weak expectations. Furthermore, the weakening of the US dollar pressured more foreign institutional selling.

The KLCI declined only 0.1% in a week to 1,556.84 points last Friday. The index has rebounded this week and closed at 1,566.23 points yesterday.

Trading volume increased last week but it was focused on lower-capped counters. The weekly average daily trading volume was 2.4 billion shares, compared with 2.1 billion in the previous week. However, the average daily trading value stayed firm at RM1.7 billion.

The market was supported by local participants. Net buying by local institutions and retailers were RM268.2 million and RM64 million (last Monday to Thursday) respectively. Net selling by foreign institutions was RM332.2 million.

For the KLCI, decliners beat gainers 16 to nine. The top three gainers were MISC Bhd (+6.2% in a week to RM8.28), Tenaga Nasional Bhd (+2.7% to RM13.88) and Hong Leong Bank Bhd (+1.3% to RM16.22). The top three decliners were Top Glove Corp Bhd (-4.1% to RM5.44), AMMB Holdings Bhd (-3.8% to RM4.57) and IOI Corp Bhd (-2.4% to RM4.11).

Global market performances were generally bullish last week. The US dollar was slightly weaker against major currencies. The US Dollar Index declined to 98.3 points last Friday from 98.8 points two weeks ago. The ringgit weakened slightly to 4.19 against the greenback last Friday, compared with 4.18 two weeks ago.

Gold prices fell slightly, while crude oil prices rebounded. Commodity Exchange gold futures declined 1.3% in a week to US$1,493.50 (RM6,257.77) an ounce last Friday. Brent crude rose 3.9% to US$60.66 per barrel. In the local market, crude palm oil (BMD) increased 1.6% to RM2,182 per tonne last Friday.

The KLCI remained below the broken support level of 1,585 points, showing a weak market. The next support level is at 1,500 points, while the broken support-turned-immediate resistance level is at 1,585 points.

Trend-wise, the KLCI remained bearish below both the short- and long-term 30- and 200-day moving averages, and the averages continued to decline. Furthermore, the index was below the Ichimoku Cloud indicator and the Cloud was falling downwards but narrower.

Momentum indicators like the Relative Strength Index and Momentum Oscillator started to rebound from their oversold levels. However, the Moving Average Convergence/Divergence indicator was below its moving average, indicating that the KLCI was still bearish.

The market was still in a downtrend as the indicators suggested but oversold. The index found temporary support at 1,550 points, which was earlier suggested. Henceforth, a technical rebound is expected, with the KLCI retesting the immediate resistance level at 1,585 points if it stays above 1,550 points.

The above commentary is solely used for educational purposes and is the writer’s point of view using technical analysis. The commentary should not be construed as investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.