Index treading on unsafe area

REVIEW: The FBM KLCI finished the previous Friday’s session at the day’s highest level to carve out a positive signal, thus setting the stage for a steadier opening for the week.

However, it could not live up to investors’ expectation, starting out 0.35 of a point below the flat line at 1,763.65 due to lack of positive catalyst on the horizon, with the overnight Wall Street ending little changed on the negative side and crude oil prices suffering a sharp fall.

Though US leads were less favourable, a spike in Chinese equities on resumption of business after a week-long break and a steadier performance in other Asian markets helped soothe the local boys.

A rebound in the ringgit against the greenback also provided support to some extent and kept Bursa Malaysia within a very tight 3.22-point band throughout.

Pending a clearer picture to emerge, the key index see-sawed to end almost flat, up 0.03 of a point to 1,764.03 in a sluggish session on Monday.

Overnight Dow Jones pulled further away from the record highs the following day as a slide in healthcare issues offset gains in technology stocks while crude oil prices drifted up 29 cents to US$49.58 a barrel after the Organisation of the Petroleum Exporting Countries’ (Opec) secretary-general hinted on further cuts in production.

Despite the mixed pictogram from the US, most stock markets in the Asia-Pacific region rose on bargain hunting, but advances were small as most investors adopted a cautious stance, with worries over a possible North Korea missile launch weighing on the markets.

In the absence of any clear direction from the offshore peers, blue chips continued to flirt within a narrow range, but with a downward bias, taking the cue from the softer overnight performance of Wall Street.

In stark contrast, most second and lower liners firmed on greater retail participation searching for short-term gains.

At the final bell, the FBM KLCI lost 2.90 points to 1,761.13, but the mixed tone of the broader market was clearly painted on the scoreboard, with winners, losers and flat counters nearly evenly matched on Tuesday.

After a short breather, the bulls on Wall Street resumed the rally, pushing the closely-watched Dow to a new record, led by WalMart Stores while investors focused on upcoming quarterly reports.

At the commodity exchange, crude oil prices jumped almost 3% to US$50.92 a barrel, boosted by Saudi Arabian export cuts in November.

As expected, most major markets in the region steadied on extended buying momentum. However Bursa Malaysia went the opposite route, as blue chips struggled due to liquidation pressure by foreign funds.

While declines in the quality issues dragged the key index down 3.92 points to 1,759.21, gains in cheaper issues kept the underlying tone of the market mixed in midweek.

Thereafter, persistent profit-taking selling alternated with sporadic bargain hunting interest dominated the floor although overseas markets were doing fairly well and losses in the heavyweights sent the FBM KLCI down 3.21 points to 1,754 on Thursday.

In another sluggish session, the local bourse fluctuated between an intra-day high of 1,756.17 in the morning to a low of 1,751.62 in the afternoon before bouncing off to settle at 1,755.32, up 1.32 points yesterday.

Statistics: For the week, the major index lost 8.68 points, or 0.5% to 1,755.32 yesterday, against 1,764 on Oct 6.

Weekly turnover stood at 16.332 billion shares amounted to RM10.052bil, compared with 12.291 billion units worth RM9.66bil done the prior week.

Outlook: Bursa Malaysia was in correction mode the past week as the FBM KLCI’s futile attempt to close above the immediate 14-day simple moving average (SMA) on Monday triggered a bout of renewed selling pressure.

Obviously, it was a big letdown. While the bullish overseas peers continued to rally amid optimism about brisk global growth, the local bourse bucked the positive trend, trading lacklustrely.

Moving forward, cautious mood is likely to prevail while persistent outflow of funds, making their way back to the developed country on expectation of a rate hike before the end of the year, hits Bursa Malaysia.

Based on the daily chart, the FBM KLCI is now treading at an unsafe area following the recent weakness and should liquidation persists, it is just a matter of time the local bourse goes underwater.

Technically, indicators are not looking very good.

In fact, the resumption of a negative expansion on the daily moving average convergence/divergence (MACD) histogram against the daily signal line and the steady downtrend on the weekly MACD suggest Bursa Malaysia may be under pressure, with the FBM KLCI in danger of breaking down this week, unless fresh buying interest comes to the rescue.

A crack of the 1,750-point floor, followed by a clear violation of the lowest 200-day SMA, lying at the vicinity of 1,741 points, will have a negative impact on the outlook going forward.

To the upside, the key index will face resistance at 1,770 points and strong challenges at 1,800 points.