15/03/2014 (Borneo Post) - After struggling to climb higher in the past two weeks, the market succumbed to selling pressure as market performances globally were bearish in the past one week. The Ringgit started to weaken although it gained some strength two weeks ago. The results season for the fourth quarter of 2013 (4Q13) is over and the market now takes a breather.

The FBM KLCI declined 1.5 per cent in a week to 1,805.12 points, after trading in a range between 1,805.12 and 1,828.73 points. The close at the range’s low shows that the market is bearish. Trading volume continued to dwindle last week and this shows that the market is staying in the sidelines. The average trading volume was 1.6 billion shares as compared to 2.3 billion shares two weeks ago. Trading value was at RM2.1 billion which indicates that higher priced stocks were the ones mostly traded. Foreign institutions continued to sell last week.

From Monday to Thursday last week, net selling from foreign institutions were at 592.7 million and local institutions were net buyers at 544.2 million while the remaining balance was from local retail at RM48.5 million. In the FBM KLCI, only two out of 30 counters gained. Decliners were led by UMW (seven per cent), SKPETRO (5.6 per cent) and IHH (4.9 per cent). Gainers were led by MISC (5.5 per cent), PETDAG (0.3 per cent) while IOI PG remained unchanged.

Regional indices
After mixed market performances in the previous two weeks, global markets were bearish in the past one week. Singapore’s Straits Times Index declined 2.4 per cent in a week to 3,062.41 points. Hong Kong’s Hang Seng Index plunged 4.9 per cent to 21,539.49 points while China’s Shanghai Stock Exchange Composite Index declined 2.6 per cent to 2,004.34 points.

Japan’s Nikkei 225 Index fell 6.2 per cent in a week to 14,327.66 points. On Thursday, the US Dow Jones Industrial Average declined 1.9 per cent in a week to 16,108.89 points. London’s FTSE100 Index shed 3.4 per cent to 6,553.78 points and Germany’s DAX Index declined 5.5 per cent to 9,017.79 points.

Commodities
The bearish performances in the equity markets helped gold price to increase while oil, including crude oil declined. COMEX gold increased 1.5 per cent in a week to US$1,370.90 an ounce. Crude oil remained fell 3.6 per cent to US$98.27 per barrel. The US dollar index slightly weakened to 79.55 points from 79.76 points two weeks ago. Malaysian ringgit to strengthen against the green back from RM3.28 per US dollar to RM3.26. Crude palm oil started to pull back, declining 3.1 per cent in a week to RM2,797 per metric tonne.

Observations
Technical indicators have turned bearish after being uncertain for the past two weeks. The index fell below the short term 30-day moving average and the Ichimoku Cloud indicator. It has also fallen below the immediate support level at 1,810 points.

This indicates that the trend has turned bearish and we expect further decline. The long term 200-day moving average is at 1,790 points. The chart shows a formation of a long term head and shoulders pattern, an indication of a long term bearish reversal pattern. The neck line, which confirms the pattern, is at 1,770 points.

Momentum indicators were already showing signs of bearish momentum gaining strength in the past few weeks. Now, momentum indicators are showing strong bearish momentum. The RSI indicator fell below its mid-level and the MACD crossed below its nine-day moving average. Furthermore, the Bollinger Bands began to expand as the index hit the bottom band of this indicator. All these indicators show that the FBM KLCI is set to decline further.

The market failed to climb above the immediate resistance level at 1,840 points to continue its up trend. An attempt two weeks ago failed to garner support. Now that the immediate support level at 1,810 points is broken, the FBM KLCI is set to trend lower and the next support level is at 1,770 points.

Falling below this level would confirm the head and shoulders pattern and if this happens, we will be expecting a major correction. The bearish global market performances put pressure in the local market, especially when foreign institutions continue to exit the market. Henceforth, we are expecting a bearish market at least in the next one month.

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