This article first appeared in The Edge Financial Daily on September 25, 2019
The FBM KLCI has been trading sideways in the past one month with a monthly average of 1,600 points. The market has been directionless on weak global market performances. Weakening of the ringgit has added to the bearish market sentiment.
The KLCI fell 0.5% in a week to 1,597.41 points last Friday, in line with global market performances. The market has been slightly bearish this week and closed at 1,592.33 points yesterday.
Trading volume increased last week and with the decline in the index, the market became more bearish. The average daily trading volume was 2.6 billion shares, compared with 2.3 billion in the previous week. The average daily trading value rose to RM2.2 billion from RM2 billion.
For the KLCI, decliners beat gainers four to three. The top three gainers were Malayan Banking Bhd (+6.8% in a week to RM8.73), Petronas Chemicals Group Bhd (+3.8% to RM7.69) and Malaysia Airports Holdings Bhd (+2.8% to RM8.75). The top three decliners were Genting Malaysia Bhd (-5.3% to RM3.05), Hong Leong Financial Group Bhd (-3.4% to RM16.14) and Kuala Lumpur Kepong Bhd (-2.9% to RM23.06).
Global market performances were mostly firm last week except for Hong Kong. The Hang Seng Index fell 3.4% in a week as protests against the government were still ongoing.
The US dollar strengthened slightly against major currencies last week. The US Dollar Index rose to 98.5 points last Friday from 98.3 points two weeks ago. The ringgit weakened to 4.17 against a US dollar last Friday, compared with 4.16 two weeks ago.
In the commodity market, commodity exchange gold futures rebounded and increased 1.7% in a week to US$1,524.40 (RM6,371.99) an ounce last Friday. Brent crude jumped 7.3% to US$64.63 per barrel on Iranian oil attacks. In the local market, crude palm oil (BMD) closed almost unchanged at RM2,204 per tonne last Friday.
The KLCI continued to trade in a sideways trading range of between 1,585 and 1,610 points. The index is now near its support level. A triangle chart pattern has been formed in the past one month, indicating that the index is in a consolidation phase.
The KLCI trend has remained bearish below both the short- and long-term 30- and 200-day moving averages. The index failed to climb above the short-term 30-day moving average despite testing it last week. Furthermore, the index is below the Ichimoku Cloud indicator and the Cloud is expanding downwards.
Momentum indicators like the Relative Strength Index and Momentum Oscillator have remained below their mid-levels, indicating a bearish market sentiment. However, the bearish sentiment is weak as the indicators are moving sideways. However, the Moving Average Convergence Divergence indicator is increasing and above its moving average, indicating that the market is slightly biased towards the bullish side in this sideways correction.
The market is expected to remain uncertain if the index remains in the trading range of between 1,585 and 1,610 points. The indicators are mixed but biased downwards and hence a breakout to below 1,585 points is more likely, which would indicate stronger bearish pressure and that the index may fall to the next support level at 1,545 points based on the triangle chart pattern price objective.
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.