Market may pull back in the new year for a correction
The FBM KLCI closed higher last week in a mixed global markets performance. The index increased 1.3 per cent in a week to 1,692.07 points on low trading volume because of the year-end holiday season.
Last Monday, Telekom Malaysia Bhd and KLCC Property Holdings Bhd were replaced by AMMB Holdings Bhd and Top Glove Corporation Bhd in the FBM KLCI component.
Trading volume was very low last week and dominated by retail players as more lower-capped stocks were being traded.
The average daily trading volume has fallen to 1.6 billion from 2.0 billion shares in the previous week and the average daily trading value declined to only RM1.2 billion from RM1.9 billion.
Local institutions supported the bullish market trend last week. Net buy from local institutions was RM166.1 million. Net sells from foreign institutions and local retail were RM114.6 million and RM51.5 million respectively.
In the FBM KLCI, gainers beat decliners 11 to four. The top gainers were MISC Bhd (seven per cent in a week to RM6.58), PPB Group Bhd (4.2 per cent in a week to RM17.70) and IOI Corporation Bhd (3.9 per cent to RM4.47). The top three decliners were Genting Bhd (3.3 per cent to RM6.06), Genting Malaysia Bhd (0.7 per cent to RM3.02) and Hartalega Holdings Bhd (0.6 per cent to RM6.22).
Global markets performances were mixed. In Asia, larger markets like Japan, Hong Kong and Shanghai fell while markets like Malaysia and Singapore closed higher.
The US market rebounded after weeks of declines and Europeans markets including UK ended up with marginal changes.
The US dollar continued to weaken against major currencies. The US dollar Index declined to 96.4 points last Friday from 97 points the week before.
The Malaysian ringgit strengthened to RM4.15 to a US dollar as compared to RM4.18 the week before.
In the commodities market. Gold prices continued to increase as equity markets get more uncertain. Gold (COMEX) increased two per cent from the previous week at US$1,283.30 an ounce last Friday.
Crude oil, however, fell 2.4 per cent to US$52.23 per barrel. Locally, crude palm oil (BMD) fell 1.8 per cent to RM2,118 per metric ton last Friday.
The FBM KLCI broke above the immediate resistance level at 1,670 points last week and like we have mentioned last week, the index may climb higher this week to test the next resistance level at 1,702 points.
Technically, the FBM KLCI has turned slightly bullish in the short term as it rose above the short term 30-day moving average. However, the index is still below the Ichimoku Cloud indicator.
Hence, the long- term trend is still bearish as the index remained below the long term 200-day moving average.
Momentum indicator are indicating that the market sentiment has turned bullish. The RSI and Momentum Oscillator has risen above their mid-levels. The MACD indicator also rose above its moving average.
Therefore, the bullish momentum has gain strength in the in the short term.
The index is expected to close at 1,700 points at year end. However, the index may pull back for a correction after a two weeks rally that was fuelled by low volume.
This shows that the rally may not be sustainable and hence a pull back towards the immediate support level at 1,670 points is expected.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical 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.