FBM KLCI gives way to correction
REVIEW: The slide below 1,500 points came on Thursday, serving as a breach of the crucial support, which was further affirmed with Friday’s continued decline.
For days, the psychological level served to affirm confidence in the equity market, holding on to the possibility that the rally would resume.
However, the rising number of conronavirus infections was too much for investors to stomach, and faced with the growing possibility that the US will reimpose lockdown measures, the profit-taking sentiment accelerated rapidly. As Asian markets opened on Thursday, they were faced with the news that several US states reported a record number of new confirmed cases.
Overall, the number of confirmed coronavirus cases in the US have risen since its economic reopening. The weakness on Bursa Malaysia was evident even prior to Thursday’s meltdown as retail investors, which had been supporting the rally, seemed to lose their risk appetite.
Daily trading values on the Malaysian bourse had begun falling over the second half of June. For the past week, the highest daily trading value was Rm3.1bil on Monday, which was about half of the daily sums transacted earlier in the month.
Bursa Malaysia was already in a jittery mood earlier in the week when White House advisor Peter Navarro suggested that the Us-china trade deal was “over.”
The comments sent global markets lower, and even as Navarro walked back his comments on the same day, Bursa Malaysia was seen only partially retracing its losses.
The market ended Tuesday trading 4.2 points lower at 1,507.04, just several notches above 1,500, after having fallen through the support earlier in the day.
Further signs of weakness were seen on Wednesday as
Bursa Malaysia failed to capitalise on a rally in technology counters. US markets were bolstered by record-breaking share price performances by Apple, Microsoft and Amazon.
While Asian markets were generally bullish, the FBM KLCI bucked the regional trend. It made a gradual descent, once more below 1,500 points, before a last dash effort pushed it to 1,502.63 points.
Thursday’s breakdown to 1,489 points served to affirm a bearish trend was taking over. There was a weak attempt to bounce higher on Friday, but in failing, the FBM KLCI descended 1.06 points to 1,488.14.
Statistics: The major index ended the week 19.12 points, or 1.3% lower over the previous Friday at 1,488.14. Total turnover for the week stood at 29.69 billion shares amounting to Rm13.57bil compared with 36.02 billion shares worth Rm22.07bil in the previous trading week
Outlook: The correction phase on the FBM KLCI appears to be underway. although the slowed descent on Friday suggests some strength remains on the index
With the negative breach of 1,500 points, the index has also passed below the ascending trend line and is likely to fall further before it comes to a stop.
As the slow stochastic has only just breached below the oversold line, there will be further declines before it makes a U-turn to suggest the start of a neutralisation phase.
Nevertheless, there remains support in the moving averages. The positive crossing between the 50-day SMA and the 100-day SMA at the start of the week reflects the gains achieved over the recent recovery, and will remain intact barring a steep and protracted descent. As the index falls further, it will find support at the rising 50-day SMA, which is pegged at 1,450. A negative crossing would see further support at 1,430.