Support seen at 1,500 points
Most of the indicators are frail
REVIEW: Spot month crude oil traded on the New York Mercantile Exchange fell 1%, or 95 cents, to US$96.13 per barrel the previous Friday, as weaker industrial growth in China and persistent eurozone worries clouded the oil demand outlook.
On Wall Street, the Dow Jones Industrial Average settled modestly easier, down 34.44 points to 12,820.60, as advances in technology-related shares helped cushion the downside.
Tracking the US losses overnight, shares on Bursa Malaysia kicked off the week on a soft platform, with the benchmark FBM Kuala Lumpur Composite Index (FBM KLCI) dropping 2.26 points to 1,582.06, extending the previous session’s declines on extended selling.
Despite the lack of leads on the horizon, there was no apparent evidence of panic selling, and the local bourse congested sideways on bargain-hunting alternated with profittaking activities. That was the trend from the opening bell, but when news that stocks in London had suffered a broad-based selloff led by heavyweight banks and commodity issues amid a worsening euro-zone crisis filtered out in mid-afternoon, investors reacted accordingly and the floor started to crack.
In the wake of the capital flight, the key index came under tremendous stress to retreat, falling 9.24 points to 1,575.08 on Monday.
US stocks and commodities fell again the next day, rattled by the prevailing political upheaval in the eurozone and growing worries over China’s economy softening more than previously thought.
The Dow slumped 125.25 points to 12,695.35 and crude oil prices plunged US$1.35 to US$94.78 in overnight trade.
Against the negative backdrop from abroad, sellers dominated the floor on the local bourse amid lack of buying incentives.
As usual, blue chips topped the losers’ list. Elsewhere, second and lower liners also took a beating, pulling the FBM KLCI down 14.01 points to 1,561.07 in lacklustre trade on Tuesday. In another selloff, Bursa Malaysia tumbled 25.03 points to 1,536.04 on lack of fresh leads in mid-week.
Thereafter, the local bourse tracked overseas performance, recouping some 8.17 points to 1,544.21 in cautious mood on Thursday before resuming the downward spiral, shedding 11.75 points to 1,532.46 on renewed selling yesterday, depressed by escalating political and economic instability in Europe.
Statistics: Week-on-week, the principal index sagged 51.86 points, or 3.3%, to 1,532.46 yesterday, compared with 1,584.32 on May 11.
Total turnover for the week amounted to 5.768 billion shares valued at Rm8.262bil, against 6.034 billion units worth Rm6.451bil in the previous week.
Technical indicators: After pulling back to the very oversold area, the oscillator per cent K climbed over the oscillator per cent D of the daily slow-stochastic momentum index to trigger a “weak buy” signal yesterday.
In stark contrast, the daily moving average convergence/divergence (MACD) histogram resumed the downward expansion against the daily trigger line to keep the bearish note.
The 14-day relative strength index retained the posture in the bearish territory.
Weekly indicators were still weak, with the weekly MACD sustaining declines despite the weekly slow-stochastic momentum index showing tentative signs of reversing up at the neutral territory.
Outlook: Bursa Malaysia’s consolidation process changed for the worse the past week, as external uncertainty came back to haunt investors. In the wake of liquidation, the FBM KLCI dived to a low of 1,526.60 during intraday session yesterday, resulting in all the gains posted year-to-date being wiped out.
Meanwhile, the selloff had dragged the key index below the 100-day simple moving average (SMA), the first time since mid-december last year, and also brought about the third “dead cross” on the chart.
Combined with the growing signs of instability among Spanish banks, the political turmoil in Greece, heightening concerns about a slowdown in China and the latest weak US data adding to the list of risk factors and denting sentiment, it really does not bode well for the market in the immediate term.
Going forward, the 200-day SMA of 1,510 is in great danger. A slip below the 1,500-point psychological level would further damage the mid-term landscape of the local bourse.
Lower support floors are anticipated at 1,480 points, followed by the 1,448 to 1,450-point band and the next, at 1,420-1,424 points range.
Technically, most of the indicators are frail, implying range-bound pattern at best. This may also mean that any rebound is likely to be short-lived, at least for now.
Initial resistance is seen at 1,560 points. The next upper hurdle is resting at the 1,591-point level.