Sentiment to be cautious this week ahead of US Fed interest rate decision
The FBM KLCI started on a bullish note last week but pulled back as market booked profits ahead of US Federal Reserve’s decision on its interest rate this week.
Declining commodities prices, especially crude oil and crude palm oil, weighed the market down. The benchmark index increased 0.5 per cent in a week to 1,717.58 points after pulling back from a high of 1,734.07 points.
Trading volume continued to rise. The average daily trading volume increased from 3.1 billion two weeks ago to 3.3 billion shares last week.
The average daily trading value increased from RM2.7 billion to RM2.8 billion. This indicates that the market volume is still dominated by lower-capped stocks. Total market valuation increased RM12 billion from the previous week to RM1,766 billion last Friday.
Foreign institutions were net buyers last week. Net buy from foreign institutions was RM341 million. Net sells from local institutions and retail were RM235 million and RM106 million respectively.
The ringgit stood firm against the green back at RM4.45 to a US dollar last Friday.
In the FBM KLCI, gainers edged decliners 16 to 13. The top gainers for the week were CIMB Group Holdings Bhd (2.9 per cent in a week to RM5.37), Axiata Group Bhd (2.4 per cent to RM4.73) and Digi.com Bhd (2.2 per cent to RM5.10).
The top decliners were Sapurakencana Petroleum Bhd (7.1 per cent to RM1.83), Petronas Dagangan Bhd (3.2 per cent to RM24.30) and Westports Holdings Bhd (three per cent to RM3.88).
Asian markets ended up marginally higher last week but China markets fell marginally. The US Dow Jones Industrial Average fell ahead of the Federal Reserve decision on its interest rates this week. Improved US economic data showed that there is a high possibility of an interest rate hike. European markets followed US queue.
The US dollar index ( that weighs the US dollar against a basket of major currencies) closed marginally higher from last week at 101.38 points last Friday. Crude oil (Brent) fell 8.3 per cent in a week to US$51.30 per barrel. Gold price fell 2.5 per cent in a week to US$1,204.50 an ounce. In the local market, crude palm oil fell 3.2 per cent to RM2,770 per metric ton.
The FBM KLCI climbed to a 19- month high last week and pulled back. It broke above the immediate resistance level at 1,720 points.
The immediate support level is now at 1,710 points and resistance is at 1,740 points.
Technically, the FBM KLCI remained bullish above the short and long term 30 and 200 day moving averages. The index is also above the Ichimoku Cloud indicator. Furthermore, the Cloud is expanding forward and this indicates that there is still strong support for the bullish trend.
Momentum indicators like the RSI and Momentum Oscillator are above their mid-levels and this indicates that the sentiment is still bullish.
However, the pull back last week caused these indicators to decline. The MACD indicator also declined and is near its moving average. This indicates a weak bullish momentum.
The technical indicators still show that the FBM KLCI bullish trend is still being supported despite a pull back. Therefore, we expect the bullish trend to continue. However, the market sentiment is expected to be cautious this week ahead of the US Federal Reserve decision on its interest rate.
An increase in interest could have a negative impact on equity markets.
Henceforth, we expect the FBM KLCI to trade sideways between 1,710 and 1,730 points this week.
The above commentary is solely used for educational purpos e s 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.