Market still supported well
The market is still being supported well despite weaker ringgit and continuous selling from foreign institutions. The FBM KLCI started on a bearish note last week but rebounded towards the end to close marginally lower from the previous week. Stocks performances in the first quarter of 2016 were generally weaker than expected.
The FBM KLCI close marginally lower from the previous week at 1,636.46 points last Friday.
Trading volume remained firm as compared the past few weeks at 1.8 billion shares. However, the average trading value jumped from RM1.8 billion to RM3 billion. Nearly RM7 billion was traded last Tuesday alone when the index fell.
Selling pressure continued to come from foreign institutions. Net sell from foreign institutions was RM1.2 billion and net buyers were local institutions Local retail was even. Therefore, the support came from local institutions.
The ringgit strengthened after sharp decline in US dollar last Friday but on a week-to-week basis, the ringgit was firm at RM4.09.
In the FBM KLCI, decliners beat gainers eight to five. The top gainers for the week were Sapurakencana Petroleum Bhd (5.7 per cent in a week to RM1.68), Axiata Group Bhd (3.2 per cent to RM5.51) and CIMB Group Holdings Bhd (2.8 per cent to RM4.49).
The top decliners were PPB Group Bhd ( 3.6 per cent to RM16.14), UMW Holdings Bhd ( 2.5 per cent to RM5.05) and Genting Bhd (2.1 per cent to RM8.34).
Most Markets in Asia rebounded last week. China’s Shanghai Stock Exchange Composite rebounded and closed 4.1 per cent higher in a week at 2,938.18 points last Friday.
Hong Kong’s Hang Seng Index increased 1.8 per cent in a week to 20,947.24 points and Singapore’s Straits Times increased only 0.2 per cent to 2,809.23 points. However, Japan’s Nikkei 225 index declined 1.1 per cent to 16,642.23 points.
The US and European were generally bearish last week after the US Federal Reserve chief Janet Yellen hinted of interest rate increase last week.
The US Dow Jones Industrial Average was firm from last week at 17,838.56 points last Thursday. Germany’s DAX Index declined 0.6 per cent in a week to 10,208 points and London’s FTSE100 fell 1.3 per cent to 6,185.61 points.
Disappointing job reports caused US dollar to tumble last Friday. In a week, The US dollar index futures fell from 95.5 points in the previous Friday to 94.1 points last Friday.
Gold rebounded sharply last Friday after falling throughout last week and the price (COMEX gold) increased 2.2 per cent in week to US$1,239.30. Crude palm oil in Bursa Malaysia increased 4.2 per cent in a week to RM2,665 per metric tonne.
If you still remember, last week I mentioned the market is still in a correction as long as the FBM KLCI remained in the sideways support and resistance levels between 1,610 and 1,640 point. Technically, the trend is still bearish bellow the down trend line and short term 30-day moving average. However, the momentum indicators like the RSI and MACD shows that market confidence is getting stronger.
The FBM KLCI is below the Ichimoku Cloud indicator but is currently below a thin cloud. This indicates that the FBM KLCI is set to move into correction after staying sideways for the past one month.
Furthermore, the Bollinger Bands has gotten very narrow and hence a strong movement is expected if the bottom top band is broken.
The market may rebound or continue its bearish trend and this depends which level the FBM KLCI breaks.
If the index breaks above the resistance level at 1,640 points, then we expect the index to at least test the short and long term 30 and 200 day moving averages at 1,660 points.
However, a breakout below the support level at 1,610 points could push the FBM KLCI lower to the next support at 1,510 points. Let’s see which level the FBM KLCI breaks.