Positive sentiment set to lift stocks
REVIEW: The Dow eked out a small gain of 2.46 points to 13,328.85 on the previous Friday, but on the broad-front, Wall Street was generally negative on worries about shrinking profit margins.
Over on the New York Mercantile Exchange, crude oil prices fell 21 cents to US$91.86 per barrel amid concerns of a looser market, spooked by a report from the Internnational Energy Agency’s, which forecast higher supplies and declining oil consumption.
In the absence of clear leads from the United States, stocks in the Asia-Pacific region were left fluctuating within a narrow range, as investors avoided from taking big bets, as growth concerns prevailed while the third-quarter corporate earnings season got into high gear.
Mirroring the sluggish overseas showing, Bursa Malaysia started out a soft platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) declining 1.58 points to 1,651.78 on extended correction process.
Business was slow while the key index was trapped in a tight band and that was the trend until mid-afternoon, where buyers emerged from the sidelines to seek value buys, encouraged by Chinese inflation data that offered hopes of further monetary easing policy to shore up growth.
However, interest was on select quality issues, good enough to help the key index reversed early losses to finish up 1.08 points to 1,654.44. Elsewhere, second and lower liners were mostly down and it was clearly reflected on the scoreboard, with 389 decliners beating 285 winners on Monday.
After the recent weakness, Wall Street finally staged a decent recovery, up 95.38 points to 13,424.23 in overnight trade, boosted by stronger-than-expected sales data. A spike in the third-largest US bank, Citigroup added to the upbeat mood.
Typically, Asian equities responded accordingly the following day but surprisingly, investors at home favoured the “wait-andsee” approach and consequently, Bursa prolonged the correction phase, with the key index falling 0.92 point to 1,653.52 in mixed note on Tuesday.
Come mid-week, global equities scaled on strong buying momentum, led by a tripledigit jump in overnight Dow, as concern over US corporate earnings eased after a couple of big names reported a better-than-anticipated earnings while Goldman Sachs raised its dividend payout. Positive German economic data also helped stoked investors appetite.
Against the bullish overseas backdrop, Bursa sprang back to life and gains in the heavyweights push the FBM KLCI up 7.15 points to 1,660.67 that day. Thereafter, the local bourse added 4.75 points to 1,665.42 on Thursday and an extra 0.93 point to 1,666.35 on follow-through support yesterday.
Statistics: For the week, the major index chalked up a sum of 12.99 points, or 0.8% to 1,666.35 yesterday, versus 1,653.36 on Oct 12.
Weekly turnover amounted to 5.956 billion shares worth RM7.977bil, compared with 4.48 billion units worth RM6.6bil done previously.
Technical indicators: The oscillator per cent K and the oscillator per cent D were firming, but fast approaching the overbought area after triggering a short-term buy at the neutral area on Tuesday.
Also on the rise, the 14-day relative strength index improved moderately from the mid-range to close at the 73 points level.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram resumed the upward expansion against the daily signal line to stay bullish. Elsewhere, weekly indicators continued to improve, with the weekly slow-stochastic momentum index scaling higher and the weekly MACD on the verge of flashing a buy signal.
Outlook: Bursa’s leading index, the FBM KLCI flirted with the immediate 14-day simple moving average line for three consecutive day earlier of the week before bouncing off on renewed bargain hunting to establish a new all-time high of 1,670.16 during intra-day session yesterday. Based on the daily chart, the key index had carved out a probable new leg of upward wave following recent gains.
Going forward, market sentiment is expected to strengthen, supported by positive news flow, such as comments from French President Francois Hollande saying an end to the debt crisis in the eurozone was “very close” and China’s Premier Wen Jiabao mentioning that the world’s second-largest economy had stabilised in the past three months and should meet 2012 targets.
In short, barring any nasty surprises on corporate earnings from the United States, investors can expect stocks to climb higher this week. Technically, the indicators are pretty encouraging, implying bargain hunting activity is likely to dominate the floor in the short term. Initial resistance is envisaged at the 1,680 points, of which a breach would see the bulls charging forward to challenge the 1,700 points psychological barrier.
Initial support is resting at 1,658 points, followed by the 21-day SMA of 1,647. A slip below the 50-day SMA of 1,643 points may see the lower 100-day SMA of 1,625 becoming vulnerable.