Rebound still weak
The FBM KLCI increased 0.5 per cent in a weak following the rebound two weeks ago. Firm ringgit and surging crude oil prices helped to slightly boost market sentiment.
Furthermore, markets performances in the region were generally bullish.
However, trading volume was low and this indicates that the market confidence is still weak.
The average daily trading volume fell from two billion shares two weeks ago to 1.6 billion shares.
The average daily trading value fell from RM2.2 billion to only RM2 billion. Total market capitalization increased RM4 billion in a week to RM1,851 billion last Friday.
Foreign institutions were net buyers as ringgit remained firm against the US dollar.
Net buys from local institutions and local retail were RM310 million and RM14 million respectively.
Net sell from local institutions was RM324 million. The ringgit was firm against the greenback at RM4.28.
Gainers marginally beat decliners 14 to 13 in the FBM KLCI.
The top gainers for the week were CIMB Group Holdings Bhd ( 4.6 per cent in a week to RM6.64), Astro Malaysia Holdings Bhd ( 2.4 per cent to RM2.54) and DIGI. com Bhd ( 1.9 per cent to RM4.80).
The top decliners were Axiata Group Bhd ( 1.9 per cent to RM1.58), Sapura Energy Bhd ( 1.9 per cent to RM1.42) and Westports Holdings Bhd ( 1.9 per cent to RM2.48).
Asian markets performances continued to be bullish last week. The Hong Kong Hang Seng index and the Singapore Straits Times index recorded fresh two- year high.
China rose to a three- month high. The US Dow Jones industrial average surged to a historical high last week after a correction two weeks ago.
European markets were generally bearish.
The US dollar continued to weaken last week against major currencies.
The US dollar index fell from 94 points two weeks ago to 93.3 points last Friday.
This puts gold into favour and the price increased 1.1 per cent in a week to US$ 1,269.00 an ounce (COMEX Gold). Crude oil ( Brent) surged 9.8 per cent in a week to US$ 52.63 per barrel. Crude palm oil futures rose 3.1 per cent to RM2,653 per metric tonne.
In the column last week, we mentioned that we expected a rebound but the increase may be limited to the resistance level at 1,770 points.
Last week’s intraday high was 1,772.3 points. The index failed to rally after breaking above the moving average.
The index is currently in the Ichimoku Cloud indicator and this indicates that the trend is directionless.
A breakout above the upper band of the Cloud would be an indication that the trend is turning bullish.
The market has been in a bearish sentiment since midJune as the RSI and Momentum Oscillator indicators were below their mid- levels.
The MACD was also below its moving average. However, these indicators are showing signs of sentiment turning bullish.
The RSI indicator has risen above its mid- level and the MACD indicator above its moving average.
The index is in a crucial period where it is going to either turn bullish or continue trading in a directionless trend.
Technical indicators are supporting the first scenario. The market is seeing some light at the end of the tunnel but it has to come out of the tunnel to feel the light.
The end of the tunnel for the FBM KLCI is 1,780 points. A breakout above this level could bring the index higher to the next resistance levels at 1,800 and 1,850 points.
However, if it fails to climb above this level, we are going to expect the market continue trending sideways.
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.