Bursa may turn sideways
In the absence of fresh market-stimulating leads on the horizon, Bursa Malaysia kicked off the week on a weaker note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) falling 6.04 points to 1,795.79 owing to an apparent profit-taking activity.
As usual, blue chips topped the losers list after a good rally and hence, the local sentiment was frail in early deals.
Meanwhile, stocks in the Asia Pacific traded mixed on continuous bargain hunting interest alternating with light selling, as a better-thanexpected Chinese manufacturing numbers helped soothe investors.
Apparently, the latest sign of stabilisation in the world’s second largest economy helped shake off a soft lead from the United States and kept the local bourse within a modest band.
In sluggish session, the key index fluctuated between an intra-day high and low of 1,800.30 points and 1,793.28 points respectively, a 7.02 points margin throughout before ending down 5,47 points to 1,796.36 on Monday.
Overnight Dow and crude oil prices sustained declines the next day on renewed concerns the Federal Reserve would begin to scale back its stimulus after influential New York Fed president William Dudley said the Fed would still be able to reduce its support for the economy later this year.
Taking the cue from a softer Wall Street overnight, Asian markets got off to a soggy start on Tuesday and later swooned lower on fresh selling, as nagging uncertainty over the Fed’s policy stance overwhelmed an upbeat eurozone and Chinese data and an election victory for German leader Angela Merkel.
On the back of the global weakness, the local bourse drifted deeper into the red, but trading was generally trapped within a modest band once again.
In lacklustre session, the FBM KLCI eased 3.88 points to 1,792.48.
Thereafter, most world equities, led by Wall Street continued to struggle on lack of support from investors in the absence of clarity on US fiscal and monetary policies. Although US home prices rose 0.6% in July on a seasonally adjusted basis, it was not helping.
In line with overseas slide, the local bourse tumbled 8.42 points to 1,784.06 in mid-week.
It sank an extra 9.90 points to 1,774.16 amid lack of support from investors on Thursday before recovering two points to 1.776.16 yesterday, after the Dow snapped a five-day losing streak on positive job data.
Statistics: For the week, the major index shed 25.67 points, or 1.4% to 1,776.16, against 1,801.83 at the close on Sept 20. Turnover for the week amounted to 10.636 billion units worth RM9.179bil, compared with 7.280 billion shares valued at RM8.420bil changed hands the previous week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were fast approaching the oversold area. It had triggered a short-term sell at the top on Tuesday.
The past week witnessed the 14-day relative strength index retracing further to the mid-range on Thursday before reversing up slightly to settle at the 55 points level yesterday.
Elsewhere, the daily moving average convergence/divergence (MACD) histogram retained the buy call but it had indicated a slight negative divergence.
Weekly indicators were tricky, with the weekly MACD extending the upward thrust after issuing a buy earlier this month and the weekly MACD keeping the sell signal.
Outlook: Bursa recovered from the critical level of 1,660.39 points on Aug 28 to a high of 1,805.15 points on Sept 20 before pulling back slightly, as investors took the excuse of a frail overseas performance, especially the Dow, to book gains.
What we saw the past several days were just a typical correction process of the market following a steep spike. In such a situation, the bulls usually would resume the scaling once the overbought condition is fully neutralised.
Based on the daily chart, the recent rally has helped the bulls to unknot a couple of “death crosses” and as long as the rising 21-day simple moving average (SMA) continues to support the index, the short-term trend of the market is bullish.
Technically, not all the indicators on our radar are positive. Though a semblance of stability has returned to the marketplace, an impasse in budget, debt talks in Washington and the prevailing worries about the Fed scaling back its bond buying would continue to cloud risky assets. Hence, we would not be surprise if the local bourse decides to stay in consolidation mode, probably within a moderate band, going into October.
Resistance is expected at the 1,811.65 points barrier, followed by the historical peak of 1,826.22 points.
Current support is seen resting at the 1,770 points. The lower floor is pegged at the 21-day SMA of 1,758 points, of which a crack may see the market heading lower on renewed selling pressure.