The market has been declining for five consecutive weeks and there are still no signs of support. However, the bearish momentum seems to have eased as the extent of the decline in the past week was less than in the previous week. A weaker ringgit and lack of positive catalysts weighed down the local market. The decline is in line with the performances of global markets. Activity was weak as players stayed out of the market. Trading volume remained low. The FBM KLCI declined only 0.4% in a week to 1,722.24 points.

The average trading volume was firm at 1.372 billion shares compared to the previous week. Average trading value declined to RM1.525 billion from RM1.6 billion. The main sellers were foreign institutions, whose sentiment remained bearish on the weak ringgit. From Monday to Friday last week, net selling by foreign institutions was RM852.7 million and net buying by local institutions was RM852 million. 

Decliners continued to outpace gainers two-to-one on the KLCI. The top gainers were Petronas Dagangan Bhd (+4.2% from last Friday), PPB Group Bhd (+2.3%) and CIMB Group Holdings Bhd (+2.1%). The top three decliners on the index were Felda Global Ventures Holdings Bhd (-8.5%), SapuraKencana Petroleum Bhd (-7%) and IOI Properties Group Bhd (-4.5%).

Markets in Asia were bearish and even the strong bullish China market is taking a breather. China’s Shanghai Stock Exchange Composite Index fell 4.4% in a week to 4,888.65 points after pulling back from its seven-year high two weeks ago. Hong Kong’s Hang Seng Index declined 1.6% to 26,566.7 points, the lowest in two months. Singapore’s Straits Times Index ended up marginally higher from last week at 1.4% at 3,298.09 points. However, Japan’s Nikkei 225 rebounded and rose 0.8% in a week to 20,257.94 points. 

Markets in the US and Europe were bullish earlier but pulled back in the past few days and minimised gains. Last Thursday, the US Dow Jones Industrial Average increased only 0.1% in week to 17,791.17. Germany’s DAX Index declined 0.7% to 10,984.97 points, the lowest in four months and London’s FTSE 100 fell 1.2% in a week to a three-month low at 6,712.58 points. 

The US Dollar Index declined from 95.7 points a week ago to 95.1 points. Commodity Exchange gold rebounded on a weak US dollar and increased 1.1% in a week to US$1,185.50 (RM4,445.62) an ounce. West Texas Intermediate crude oil increased 2.2% in a week to US$59.61 per barrel. Crude palm oil on Bursa Malaysia declined 1.2% in a week to RM2,290 per tonne.

The KLCI broke the temporary support level at 1,727 points and established another temporary support at 1,718 points after it rebounded yesterday. The trend remained bearish below the short- and long-term 30- and 200-day moving averages and the index stayed below the Ichimoku Cloud indicator. The Cloud is currently thin, and normally the market rebounds.

Momentum indicators like the RSI and Momentum Oscillator were flat despite the decline and this weak bullish divergence indicates some support. The RSI indicator and other oscillators indicate that the KLCI is oversold and as I mentioned last week, this may create some buying interest. The index remained below the middle band of the Bollinger Bands indicator but the bands are starting to contract. This indicates that the bearish momentum is slightly weakening. 

The market remains bearish but the momentum has started to ease. However, a strong reversal is needed to boost market confidence. This can only happen if the KLCI can climb above the immediate resistance level range of between 1,750 and 1,760 points. Failure to overcome this level indicates that sentiment is still bearish and the index may start to decline, especially when the temporary support level at 1,718 points is broken. A breakout below this level means that the index is set to trend towards a stronger support level at 1,675 points. 

There is no opportunity in the market as most sector indices are declining. Even the bullish technology sector is starting to face resistance. Second-liners started to take a beating last week and this may continue in the next one or two weeks. Hence, it is better to stay out of the market.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at [email protected]. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.

This article first appeared in The Edge Financial Daily, on June 17, 2015.