Sellers still in control, for now

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KUALA LUMPUR (Jan 19): The FBM KLCI could continue to trade a cautious note today as local investor sentiment remain on tenterhooks in the absence of any solid fresh catalyst.

Investors will also be looking toward the announcement of the revised Budget slated this week.

Wall Street stocks rebounded on Friday on signs the U.S. economy was on track for solid growth with consumer sentiment hitting an 11-year high, while the euro slid further against the dollar a day after Switzerland ditched its currency cap, according to Reuters.

Crude prices rallied on the U.S. sentiment report and after the International Energy Agency said lower prices had begun to curb production in some areas, including North America. The IEA said prices might fall further, but "signs are mounting that the tide will turn”, it said.

U.S. gasoline prices fell again in December, leading consumer prices to post their biggest decline in six years, while a gauge of underlying inflation was flat. The data could make the Federal Reserve cautious about raising interest rates, said Reuters.

AllianceDBS Research in its evening edition last Friday said the FBM KLCI had on Jan 16 traded lower to a low of 1,732.35 as market participants chose to play a selling game in anticipation of a lower market.

It said that in the absence of stronger supportive buying interest, the benchmark index was trading in the red throughout the trading sessions before settling near the day’s high at 1,743.57 (- 1.43, - 0.08%).

 

“In the broader market, losers outnumbered gainers with 426 stocks ending lower and 366 stocks finishing higher. That gave a market breadth of 0.85 indicating the bears were in control,” it said.

AllianceDBS Research said the lower high and lower low on Jan 16 indicated that sellers were in better control over the buyers.

“However, it remains pre-mature to confirm a change of game play pattern from buying (Jan 15) to selling (Jan 16) at this juncture as we need more technical evidence to confirm in the coming few days.

“Given the overall market set-up in the last 3 days, it appeared that the benchmark index has a strong tendency to trade lower with support zone seen between 1,700 and 1,718. The overhead resistance zone is pegged between 1,760 and 1,770,” it said.

The research house said that indicator wise, the MACD was still above the 9-day moving average line.

“The analysis of overall market action on Jan 16 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,732.35 level on Jan 19,” said AllianceDBS Research.