Daily FBM KLCI chart as at September 19, 2014 using Next VIEW Advisor Professional

20/09/2014 (Borneo Post) - The market was bearish as expected but was supported at the 1,840 to 1,850 points range support level as we mentioned last week. The benchmark FBM KLCI was bearish early in the week but rebounded mid-week after the US’ central bank decided to leave key interest rates near zero but further taper its bond-buying programme, which is likely going to end by the end of this year.

The market extended its bullish trend last Friday after Bank Negara Malaysia (BNM) decided to maintain its overnight policy rate (OPR). The benchmark FBM KLCI closed only 0.4 per cent lower in a week to 1,849.49 points after rebounding from a low of 1,836.5 points last week.

Trading volume continued to decline last week but marginally as investors were in the sidelines ahead of the BNM’s meeting last Thursday.

The Average daily volume fell to 2.3 billion shares last week as compared to 2.4 billion shares two weeks ago. However, volume picked up last Friday with 2.6 billion shares.

Average trading value remained firm from last week at RM2.1 billion. Total market valuation declined from RM1,783 billion to RM1,777 billion.

Malaysian ringgit continues to weaken against the strong US dollar and this prompted foreign institutions to continue distributing. Net selling from foreign institutions last week from Monday to Thursday was RM544.4 million.

Retail market players are starting to buy again and they were net buyers at RM51.6 million. Local institutions continue to support the market with a net buying of RM492.8 million. In the FBM KLCI, decliners beat gainers five to four.

Gainers were led by IOIPG (five per cent), AMBANK (2.5 per cent) and IHH (2.4 per cent) and decliners in the index were GENM (five per cent), BAT (4.3 per cent) and FGV (3.3 per cent).

Japan rose to a near seven-year high last Friday while other markets in Asia closed lower after a weak start last week but the rebound mid-week minimized the losses. Singapore’s Straits Times Index declined 1.2 per cent in a week at 3,305.05 points. Hong Kong’s Hang Seng Index also declined 1.2 per cent in a week to 24,306.16 points. China’s Shanghai Stock Exchange Composite Index declined only 0.1 per cent in a week to 2,329.45 points. Japan’s Nikkei 225 rose 2.3% to 16,321.17 points.

Strong US dollar and improving US economy pushed the US market to a historical high. The listing of China’s internet giant and world’s second largest IPO, Alibaba in Wall Street last Friday provided more excitement in the US market.

The US dollar index increased from 84.46 points two weeks ago to 84.86 points, the highest level in four years. On Thursday, the US Dow Jones Industrial Average rose 1.3 per cent in a week to a record close at 17,265.99 points.

London’s FTSE100 Index increased only 0.3 per cent in a week to 6,819.29 points and Germany’s DAX increased 1.1 per cent to 9,798.13, the highest level in nearly two months.

Stronger US dollar continued to outshine precious metals while crude oil remained firm. COMEX gold declined 1.2 per cent in a week to US$1,225.90 an ounce. Crude oil was almost unchanged from last week at US$93.02 per barrel.

Weaker ringgit and improving demand continue to boost crude palm oil prices. Crude palm oil futures in Bursa increased 1.2 per cent in a week to RM2,109 per metric tonne. The Malaysian ringgit was at RM3.23 against the US dollar as compared to RM3.20 a week before.

The FBM KLCI rebounded from the 1,840 points support level but failed to close above the long term 200-day moving average at 1,851 points.

The index is also below the short term 30-day moving average and the Ichimoku Cloud indicators which are currently at 1,862 points. This indicates that the trend is bearish and the rebound is a technical rebound of a bearish trend unless resistance levels are broken.

Momentum indicators like the RSI, Momentum Oscillator are showing that the momentum is still bearish as they are under their mid-levels. The MACD indicator is still below its trigger line. Furthermore, the FBM KLCI is still trading near the bottom bands of the Bollinger Bands indicator. However, these indicators are hooking upwards, indicating a rebound.

In any rebound, the price is expected to test resistance levels. In the case of the FBM KLCI, the index is expected to the short term 30-day moving average, which is also near the down trend line resistance level.

The resistance level range between 1,860 and 1,870 points. The trend turns bullish only when this resistance level can be broken. The support level remained at the 1,840 to 1,850 points level.

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.