Kuala Lumpur Composite Index (FBMKLCI): Stronger resistance

The market was awakened by the news from Dubai Monday after a holiday last Friday for the Aidil Adha celebration. The market took a small plunge on Monday after Dubai World, an investment company which manages and supervises a portfolio of businesses and projects for the Dubai government across a wide range of industry segments, seek delay in debt payments. This caused fear across markets and investors were seen selling finance and construction stocks relating to Dubai as they were afraid that this may fuel another financial crisis.

On Monday, the benchmark FBMKLCI opened 13.73 points lower at 1,256.88 points. Market was volatile and uncertain that day with the FBMKLCI trading in a range between 1,248.58 and 1,268.98 points before settling slightly higher than the open at 1,259.11 points. The market rebounded in the next three days and closed at 1,272.35 points Thursday, covering Monday’s losses and back to the same level as the previous week. Volume on Monday was relatively higher than the average at 1,100 million shares but the daily average for last week was 906 million shares, just slightly lower than the previous week.

Technical indicators readings were almost the same as last week despite a bearish start on Monday. The FBMKLCI went below the 30-day moving average, which has been supporting the index since April, on Monday but managed to climb and stay above it when the market rebounded. The 30-day moving average is currently at 1,265 points while the longer term 90-day moving average is at 1,221 points. They were no changes in the characteristics of the moving averages.

However, momentum indicators seem to be a little bearish. The Relative Strength Index (RSI) decline below 50 on Monday but managed to rebound slight above it. The MACD indicator continues to slide and the Momentum indicator is currently below the mid-level. All these indicators are suggesting a weakening momentum in the uptrend and this means that resistance is getting stronger.

As the FBMKLCI continue to trade sideways around the 20-day moving average, the Bollinger Bands continues to tighten further. The volatility is getting lower as the market is not moving into any clear direction. The daily average trading range is pegged at 6.6 points, based on the Average True Range indicator. The Ichimoku Cloud indicator continues to stay sideways but slightly thinner. This means that the support for the current up trend is getting weaker.


Daily KLCI chart as at 3 December 2009 using NextVIEW Advisor

The index has already tested the 1,260 points support level because of the Dubai news but went back above it again. With the stronger resistance and lack of catalysts, the FBMKLCI may test the 1,260 points support level again this week and possibly move into the next support level at 1,230 points if the first support level is broken. Be prepared to also face another week of low volatility and liquidity. The crucial support level, which determines the current up trend is maintained at 1,200 points. Resistance level remains between 1,290 and 1,300 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

US Dow Jones Industrial Average (DJI) – Momentum indicators are neutral

Investors in the US were startled by Dubai’s debt problems on their national holiday celebrating thanks-giving Thursday. The panic caused investors to sell on Friday and this caused the DJI to fall 154.48 points or 1.48% to close at 10,309.92 points. The DJI went as low as 10,231 points intraday before rebounding to close higher. On the last day of November, the DJI slightly rebounded to close at 10,344.84 points. The selling pressure was not as bad as expected despite heavy losses in the Asian and European markets when US was on holiday. The selling pressure was buffered by improve consumer spending, improved jobless claims and home sales.


Daily DJI chart as at 30 November 2009 using NextVIEW Advisor

Trading volume was unexpectedly low as investors were not rushing to sell, but prefer to hold on and wait for further developments. The DJI is currently still in an uptrend supported strongly by 60-day moving average. The 60-day moving average is currently at 9,900 points and the DJI is expected to pullback to this immediate support level. Momentum indicators have gone into the neutral zone, but in the long term, the uptrend is still strong because these indicators in convergence with the uptrend. If the immediate support level is broken, the DJI may fall further into correction and find support at 9,700 points. However, if the immediate resistance level at 10,500 points is broken, the market may rally strongly to the next resistance level at 10,700 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Hong Kong Hang Seng Index (HSI) – Stronger bearish pressure

As one of the major financial hubs in Asia, the Hong Kong equity market took a plunge after Dubai announced having problems in paying its debts which caused investors to worry about another financial crisis. The HSI gapped down and fell slightly more than 1,000 points or 4.8% on the 27th November to close at 21,134.50 points. However, the market rebounded at the end of the month to close at 21,821.50 points. In the middle of November, the HSI peaked at 23,100 points, the highest since August last year. Trading volume, which continues to slightly decline in the past few months have been quite high in the last few days in the month of November.


Weekly HSI chart as at 30 November 2009 using NextVIEW Advisor

The HSI rebounded exactly on the 90-day moving average. Since April this year, the HSI was supported by the 60-day moving average but the plunge on Thursday broke this support level. However, the benchmark index is back above the 60-day moving average. The upward momentum for the past three months has been weak. The momentum indicators continue to diverge from the uptrend since September and indicate stronger bearish pressure. This shows strong resistance and there is a little chance for the HSI to move higher above the recent peak at 23,100 points. The HSI may test the 90-day moving average support level again at 21,250 points and if this is broken, the market may continue to move further downwards to the next support level at 20,400 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

TRADING TOOL COMPATIBILITY Part II by Daryl Guppy

This article is in two parts. Click here for Part 1

The next most important issue is indicator compatibility. Determining this starts with a visual chart inspection and is based on the first step in analysis shown above. The chart example shows a rising trend from March through July. In this sense it meets the trending criteria we look for in the first question. However, this stock does not meet the indicator compatibility criteria.
Our reader suggested three methods of managing the trend. They were the count back line, the straight edge trend line and the 2xATR indicator. In assessing the trend we would apply only the first two of these. Our preference is to use the 2xATR as a trailing protect profit stop loss only if the trend develops unexpected momentum. The diagram shows the application.



In a steadily developing trend, shown as A, where volatility, or price changes, remain much the same, we apply the count back line and straight edge trend line. These techniques are used to protect capital in the early stages of the developing trade. They are then quite satisfactorily applied to protect profits as the trade develops.

Some trends, shown as B, the price behaviour changes dramatically. The underlying trend remains intact, as shown by the straight edge trend line. However prices bubble upwards in an explosion of unsustainable momentum. The bubble signals significant changes in volatility. Prices behave differently. The collapse from this bubble is often dramatic, and can also cause a collapse of the underlying trend. For traders who own the stock and who have been managing this as a trend trade, this bubble presents an opportunity to take extra profits. The problem to resolve is how to best protect profits. In some circumstances the 2xATR does this most effectively. This is when we apply this indicator. We do not generally use it to manage trades during a stable trend. In a bubble situation we use a combination of CBL and 2xATR to develop the best solution for protecting profits.

The 2xATR approach is used by Chris Tate for general tend management. This is covered in detail in The Art Of Trading.



Indicator compatibility simply means that our preferred indicator has provided an effective solution to managing the trend in this stock in recent past. The chart shows an example of indicator incompatibility. Our preferred trend management tools are a straight edge trend line and a count back line. On the chart extract shown we show the count back line failure points because we want to highlight how indicator compatibility is assessed.

A close below the count back line, shown as the thick black line, signals an end of the trend and a trade exit. Each time a new high is made, the count back line is recalculated. A close below the CBL line triggers an exit from this trade on the grounds that the trend has an increased chance of failure. The balance of probability favouring a continuation of the trend has shifted.

The problem is that subsequent price action showed the trend did continue upwards. The exit signals defined by the count back line were false. We could not know this at the time. Traders have no choice but to exit the trade because the indicator suggests the up trend has ended.

If we were interested in trading this stock using our preferred combination of the count back line and a straight edge trend line then this chart tells us that this stock is incompatible with these techniques. Here is a most important point and it is relevant to any indicator combination we use. The price behaviour of this stock is not compatible with or responsive to our indicator. This does not mean the indicator fails. It simply means it is the wrong tool for this particular job.

Indicator compatibility is about finding the right tool for the job at hand. Home mechanics who use an SAE spanner on a Metric bolt understand the problem clearly. The tool – the spanner – is an excellent tool, but it doesn’t quite fit the job at hand – tightening a metric bolt. In this chart, the price behaviour does not fit the tools we prefer to use – the count back line. If this tool has been incompatible in the past it is unlikely to be compatible in the future.

There is a trend trade with this stock, but it cannot be effectively managed with our chosen tools.



The chart shows how indicator and trade compatibility are bought together in an effective trading solution. The tools we want to use are a straight edge trend line and a count back line. The objective is to join an established trend so this means that we must be able to plot a straight edge trend line with a good level of confidence. We look for a minimum of three rebound points.

Once this condition is established we then apply the count back line to establish if this has been compatible with trend management to date. The answer is yes and this suggests that this technique will continue to be useful in the coming weeks or months. A selection of previous CBL calculation points is shown by the red lines with red * at the calculation starting point.

Once a stock has been selected based on these compatibility factors the traders attention then turns to other factors such as price leverage, volume and the best entry point. Most times traders have to choose between a number of almost identical trading opportunities. The trader’s objective is to maximise the profits for any trade and this is helped by selecting stocks which offer better price leverage. Stocks trading at lower price levels have the capacity to boost profits more easily than stocks trading at $20 or higher.

Although it is human nature to hunt for a bargain, this is not always a good idea in the market. We have selected this stock because we believe it is in a strong trend. We bet against ourselves if we then wait for a price pullback – for weakness in the trend - before buying the stock. If the opportunity arises our preference is to buy the stock as close to the trend line, or the count back line as possible. We certainly do not want to pay the high price of a short term up trend, but nor do we want to miss out on this stock by waiting for a price collapse. The objective is to buy the stock at a reasonable price that is consistent with its recent trading range.


To read more articles and commentaries from Daryl Guppy, click HERE

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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

Benny Lee on BFM 89.9

Shares on Bursa Malaysia rose today, with the FBM KLCI gaining 0.6% to 1,266 points on a technical rebound, according to Benny Lee, Chief Market Strategist of NextVIEW. He believes that in the short term, upside potential for the market is very limited and looking at the FBM KLCI there is a strong resistance at 1,290-1,300 points. He advises investors should stay away from the market until the market corrects further.

FTSE Straits Times Index (FTSTI) – Head towards immediate support level

In Mid-November, the FTSTI managed to test the 2,700 points immediate resistance level and rallied to the next resistance level at 2,800 points, climbing to as high as 2803.83 points. However, the market fell steeply in the last two trading days of the month by falling about 70 points or 2.5% to close at 2732.12 points. On a month-to-month basis, the benchmark index was still able to close positively by an increase of 81 points or 3%. Trading volume has slightly declined in the past few months. Investors’ confidence in the market has been weak.


Weekly FTSTI chart as at 30 November 2009 using NextVIEW Advisor

The FTSTI is still in an uptrend and since April this year when the uptrend started, it has been supported by the 60-day moving average. The moving average is currently at 2,685 points and this should be the immediate support level. The pattern from the chart shows that the market has strong support at 2,600 points. The FTSTI is expected to head towards the immediate support level before continuing the trend. There is still a chance for the benchmark index to climb to the uptrend technical target at 3,000 points but this is unlikely going to happen in the next 4 to six months. Immediate resistance level is 2,800 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

USD/CHF: A market rally will soon be overdue.

Support at 1.0032 held until near the end of November. The February 18th, 2008 low of .9784 is almost certain to be tested in the next short while. There is minor support at .9934. Beyond that the way is fairly clear to the 15 year low of .9784, mentioned above.

Other downside targets range to .89 and beyond, however a market rally will soon be overdue.



TECHNICALS
KELTNER CHANNEL – Framing recent resistance and support quite well.
SMA200 – down-sloping at 1.0690 (not shown on chart)
EMA 20 – down, in support of the down trend.
Stochastic – in oversold territory
MACD – strong down but diverging from price.
R1 – nearby resistance at 1.0032
R2 -1.0223
R3 – more distant resistance at 1.0660.
S1 – nearby support at 1.0032
S2 - .9934
S3 - .9784

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

GBP/USD :Expect a test of the August high in the near future

GBPUSD has performed more poorly than expected for most of November.

Although its’ rise from March to August/09 seemed to be impulsive, the last 4 ½ months have failed to produce much follow-through momentum. Strong resistance at 1.7042 can be traced to previous levels of support and resistance as far back as 2005, and even 1998. Combinations of previous resistance and support create some of the strongest current levels of resistance and support as well.

Although the market has moved in a sideways correction since August, 2009, to the present, the market has so far been contained on the lower side by the .382 Fibonacci support level, measured from the January 23rd low of 1.3501 to the August 7th high of 1.7042. Bearish energy now seems to be dissipating over time rather than taking a large toll on value.

The current range is clearly defined until the high of 1.7042 is exceeded to the upside or the Oct. 13 low of 1.5707 is exceeded to the downside.

What looks to be a quite bearish correction immediately above the rising trend line on the chart, is quite possibly a so-called irregular correction, which is actually quite bullish in its’ implication. If this is the case, expect a test of the August high in the near future.



TECHNICALS
MACD – down, but in positive territory
Bollinger Bands – tightening, which may imply a more ranging market for a period of time.
Stochastic – rising from near its’ over sold level.
SMA200 – rising
EMA55- rising, immediately below current values.
R1 – resistance at 1.7042
R2 – 1.7550 (not shown on chart)
S1 – 1.6425
S2 – zone of support from 1.6210-1.6100
S3 – 1.5700

TECHNICALS
MACD – rising strongly, and with bullish divergence.
Stochastic – turning down from around the 80 evel.
SMA200- sloping downwards, far above the current price, at 1.0814.
EMA20- rising from below the market.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Malaysia FBKLCI: Sideways with downward bias

Last week’s market performance was almost a non-event as the market was relatively quieter and lower in volatility. After two consecutive weeks of making new highs for the year, the benchmark FBMKLCI failed to make a new high last week. The index closed at 1,271 points Wednesday, 4 points lower than previous Wednesday’s close. Average daily trading range was only 5.6 points against 7.5 points in the previous week. The average daily trading volume in the past one week was 915 million shares against 1170 million shares in the previous corresponding week.

After rebounding from a downtrend, the US dollar continues to weaken again against the Malaysian Ringgit and other major currencies. The Malaysian Ringgit strengthened from 3.39 to 3.36 against the US Dollar in a week. The weakening US dollar pushes prices of commodities higher. Leading the pack is gold and there seems to be a buying frenzy in this precious metal. Price of gold creates new historical high and at US$1,170 an ounce, it could easily hit US$1,200 soon. Price of crude palm oil in the futures went as high as RM2,518 before settling at RM2,482 per metric ton. Just about a month ago, the price of crude palm oil was trading at around RM2,200. However, price of crude oil continues to trade below US$80 a barrel. There is already a concern about commodities price bubble, especially gold.

Last week, I wrote that the market may move into a correction any time soon. The correction last week was not the one that I am expecting. I am expecting a bigger one. Therefore, the correction may have just started, unless the FBMKLCI breaks above 1,280 points. The short term 30-day moving average is at 1,262 points, just 10 points below the index. The 30-day moving average has been providing good support for the FKLI for the past 6 months and therefore a break below this moving average may signal major correction in the uptrend.

Momentum indicators continue to decline. The Momentum and MACD indicators get nearer to the mid-level while the RSI indicator maintains the same level as the previous week. In the longer term, the divergence between the FBMKLCI and the momentum indicators suggests a strong resistance at the nearest high, which is 1,288 points. However, the Bollinger Bands width remained wide and firm as the index stays above the middle band, which is a 20-day moving average. This shows that despite the weaker sentiment, the market is still being supported well.

The Ichimoku Cloud indicator width maintains the same but has slightly increased in value. The cloud, which is plotted 26 trading days ahead, is currently between 1245 and 1,270 points. So, the FBMKLCI level is just above the cloud. The index is therefore expected to move sideways this week with a downward bias because of the weak momentum. If the FBMKLCI is unable to continue its trend in a month, then we may see further correction downwards.


Daily FBMKLCI chart as at 25 November 2009 using NextVIEW Advisor

The immediate support level is at 1,260 points (the 30-day moving average) and if the index falls below this level, the market is expected to move further into correction and test the next support level at 1,200 points. Technically, 1,200 points is a crucial support level and the uptrend can only be sustained if the FBMKLCI stays above this level. A major correction may take place if this crucial support level is broken. The resistance level remains at 1,300 points and like I have mentioned in my earlier commentaries, I am not expecting it to be broken this year.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

TRADING TOOL COMPATIBILITY by Daryl Guppy

This article is in two parts. Watch out for Part 2
Although we try to explain the processes of trading clearly there is no escape for the fact that trading is a complex activity. A successful trade brings together many different features. It includes the right selection of indicator tools appropriate for the type of trade. It includes selecting a type of trade that is compatible with our trading style, our emotional reactions and to the way the market is performing at the time. There are always a wide variety of trading opportunities in the market. There are far too many for any individual trader to trade, so we are forced to make choices. The mistake the novice often makes is to search for those trades which offer the most spectacular returns rather than find trades which offer high probability trading situations.

We prefer trade opportunities which offer higher than average returns, but these are in addition to the high probability trading situation. We like chart patterns because they point the way to high probability trades. Stocks that pass this filter are then selected on the basis of higher potential profits. We do not start with potential profits and hope for high probability.

Compatibility of technique and indicator selection is very important for success. A reader wrote to us during the week. He noted that he had learnt that when he buys a stock he has to manage its trend. This is correct and at the core of almost all trading opportunities. The trend may be very short term, as in an intra day trade. It may persist for several days or weeks, as with position trading. Or it may prevail for weeks and months as was common with many stocks between 2004 and 2007. Each of these opportunities is a trend trade, but each calls for different types of management and tools.

The reader continued, noting that he can manage the trend using the count back line, straight edge trend line, the 2xATR indicator and Darvas boxes. Although this is correct, there is an important division in this list. The Darvas approach is a stand alone approach that does not incorporate any additional indicator tools such as trend lines.

The reader asked which of these tools is good to use and which tool is most commonly used to manage the trend? If there was a simple universal answer then trading would be a much easier profession to master. The answer relies on easy to use indicators, but complex combinations that are custom designed to suit each individual. Many people will use the same collection of indicators, but each will apply and interpret them in slightly different ways. Each trader will manage the trade in different ways, reacting to growing profits, or small losses in ways different from other traders. The result is a completely different, and perhaps successful trade, based on the same stock. The current series of notes on finding the trader’s edge is a practical demonstration of these differences.

This combination complexity should not deter new traders, but it is important to be aware of it. The selection of type of trading techniques which are compatible with your personality and preference is an individual issue. The solution also changes as you gain more experience in the market. In these notes we skip this aspect of trade selection and assume you have found the type of trending situation that you are comfortable in trading. Once this first step has been taken the next most important issue is behavioural compatibility.



The MBL chart from more bullish times is a good example of the initial decisions made about stock and indicator compatibility with a trading approach. Many stocks are in the breakout stage of this trend development. When traders look at this chart they have two choices. One choice is to decide what type of trading opportunity exists with MBL based on the past 2 to 3 months of price activity. There are a variety of solutions, including short term rally trading, counter trend trading, or perhaps taking a put warrant or short side trade. These answer the question: What type of trading opportunity exists on this chart? These are all valid solutions, but they are not our solution.

The question we have to answer is about compatibility with trend trading. The question we have to answer is this: Is this chart a trend trade? This is the second choice we have as traders and that is to decide if the stock is compatible with our preferred trading technique. Our focus in these notes is on trend trading approaches so the answer is a clear “No.” For much of 2003 MBL was compatible with trend trading techniques. Since October 2003 this had not been the case with MBL. We do not need to decide what is the best trading method for this period. We simply need to note that this period is not suitable for trend trading. The nature of the trend changed, and the nature of the price action changes after October. It is pointless attempting to make any of the trend trading techniques fit this chart.

The foundation of a successful trade rests upon selecting a chart or stock with a behaviour pattern that suits our trading approach. A trend trade is built around stocks that are moving steadily upwards. The point at which we identify this compatibility will change. Initially MBL was a breakout trade as the previous downtrend ended. Sometime in this period other traders noted the potential for a trend trade. This is indicated by the way the trend trade line starts at a midpoint in the breakout trade segment of the chart display. There is no clean cut off point or date that says this is a breakout trade and this is a trend trade. Aggressive traders recognise trend trades early. Conservative traders wait for much longer before accepting a new trend is in place. This effects their entry point, and the level of profit achieved from the developing trade.

To read more articles and commentaries from Daryl Guppy, click HERE

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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

Benny Lee on BFM 89.9

Benny shares his views on Bursa Malaysia FBMKLCI and CPO Futures, US dollars and Airasia.

KL Composite Index (FBMKLCI): Expected to move into a correction anytime soon

The market continues to make new highs last week but was not able to sustain and immediately pulled back. Resistance is getting stronger, as mentioned last week. The FBMKLCI went as high as 1,288.42 points, highest since May last year before pulling back to close at 1,276.65 points Thursday. The benchmark index still managed to close higher but only 4.9 points from the previous week. Last week, there was selling pressure whenever the market tries to push prices higher. Traders’ sentiment was a little weak as the price in the KLCI futures market closed at a 5 points discount from the underlying FBMKLCI.

The US Dollar rebounded last week against major currencies after starting on a weak note earlier this week but is still lower week-to-week. The US Dollar index (futures) in ICE NYBOT is currently at 75.545, 0.625 or 0.8% from last Monday’s close at 74.920. The Malaysian Ringgit is RM3.39 against the US Dollar, weakened by RM0.01 from last week. Price of commodities increased week-to-week despite a rebound in the US Dollar.

The price of gold continues to make new historical highs and closed 2.2% higher at US$1143.60 an ounce from the previous week. Price of crude oil futures in NYMEX however continues to trade around US$80 a barrel. Price of crude palm finally increased after moving sideways for weeks. The price rose 5.6% higher to close at RM2,371 per metric ton. TOCOM rubber futures (RSS3) also continues its upward rally by climbing 4% to close at JPY$243.50 per kg in a week. Price of rubber has risen 7.7% month-to-date.

The movement on the FBMKLCI can be considered uncertain this week as it close almost at the same level as last week, despite making new highs. Trading volume last week was almost the same as the previous corresponding week. 1.17 billion shares exchanged hands daily on average. The trading volume on Thursday was 1.385 billion shares and Maxis shares, which was re-listed account for about 22% of Thursday’s trading volume. The FBMKLCI up trend is still being supported by increasing moving averages. The nearest short term 30-day moving average is currently at 1,258 points. All short to long term 30 to 90 day moving averages are increasing.

Despite making new highs for the past two weeks, the momentum indicators like RSI and Momentum are still lower than their previous pivot high. The divergence still exists between the momentum indicators and the FBMKLCI uptrend. This simply means that the bullish rally in the past two weeks may not be strong enough to overcome the increasing resistance standing front of the bulls. The MACD indicator may have crossed above its moving average but the cross happened with a lower MACD level.

The volatility of the FBMKLCI is a little weaker last week than the previous week. The FBMKLCI traded in a 7.6 points daily trading range, calculated from the Average True Range (ATR) indicator. The previous week’s ATR was 8.5 points. This simply means that the market does not have confidence in a direction as sentiments were mixed. However, The Bollinger Bands is still expanding as the FBMKLCI managed to stay above the middle band.

The leading Ichimoku Cloud indicator has increased a little but the width of the cloud remains the same. The support from this indicator is between 1,240 and 1265 points. There is still no sign of any trend reversal in the next one month, based on this indicator reading. The possibility of the FBMKLCI to climb to 1,300 points is getting thinner. I have mentioned before that the index may test this level but may not be able to break above it this year.


Daily FBMKLCI chart as at 19 November 2009 using NextVIEW Advisor

With the current level and momentum, the FKLI is expected to move into a correction anytime soon, especially if the 1,258 points immediate support level breaks. The next technical support level will be at 1,200 points. The uptrend is expected to continue with a lower momentum if it can stay above the immediate support level.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Bursa Malaysia FBMKLCI: Resistance getting stronger

The FBMKLCI managed to inch up higher last week but still short of the 1,300 points expected target. Last week, the benchmark index went as high as 1,279.52 points and closed at 1271.75 points Thursday. One a week-to-week basis, the index rose 17.79 points or 1.4%, slightly higher than the increase in the previous week. On Thursday, there is evidence of support when the market rebounded in the last two hours of trade to cover its strong losses in the morning. The FBMKLCI went to a low of 1,262.48 points before it rebounded 9 points.

The FBMKLCI continued its uptrend journey by breaking above the 1,272 points immediate resistance level from the Bollinger Bands indicator last week. A new pivot high is created and this simply means that the uptrend is still developing. The index is well above the short to long term 30 to 90 day moving averages. The upward rally last week was supported by a relatively lower volume of 1.16 billion shares on a daily average. The average for the previous corresponding week was 1.3 billion.

There is a strong divergence between the current uptrend on the FBMKLCI and the momentum indicators. While the FBMKLCI is making new highs, the RSI, MACD and Momentum indicators are not. These indicators are indicating that the uptrend has weakened as the resistance gets stronger. At current level, the market provides a good opportunity for profit taking for those who have got into the market earlier.

The FBMKLCI has been trading around an 8.5 points range a day, as indicated by the 5-period Average True Range (ATR) indicator. The market volatility is almost the same as the previous week. When the index moved towards the top band of the Bollinger Bands as I have mentioned in my first paragraph, the bands starts to expand slightly. For the many times the FBMKLCI broke the top band in the past few months, the market rallied, provided that the FBMKLCI keeps testing the top band. Therefore, next week will be a crucial test that if the index is not move along to top band, the resistance is clearly strong.


Daily FBMKLCI chart as at 12 November 2009 using NextVIEW Advisor

There is still a possibility for the FBMKLCI to climb to 1,300 points, provided that it stays above the immediate support level of 1,230 points. However, it may not happen this year as it needs a proper correction to remove the resistance ahead. The leading Ichimoku Cloud indicator starts to expand but at between 1,220 to 1,260 points, still below 1,300 points. Therefore, the FBMKLCI is expected to just trade slightly above this range in the next one month. If the 1,230 points support level is broken, the FBMKLCI may find support at 1,200 points.


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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Benny Lee on BFM 89.9

Gold Analysis and Forecast

The long term potential for Gold is higher than what we’ll discuss in this article. My primary purpose here is to identify and confirm trend, and determine as best we can the logical price targets for gold during the month of November. The market continues to be very bullish, although there is evidence of temporary weakening momentum.

Click HERE to continue reading this analysis and forecast by Don Schellenberg

EURO / US DOLLAR ANALYSIS and FORECAST

Is EUR/USD ready for a big swing down?

I ask myself that question because this currency pair appears to be sitting at an important crossroad. It’s received some support from a six-month old rising trend line and hasn’t moved far from there for several days.

On October 26th, it completed a five wave move up that began on August 17th/09. Generally after five waves a fairly large correction can be expected, but not guaranteed, and the drop for the October high of 1.5062 can’t be described as large in the relative sense since it currently approximates corrections that occurred in August and September.

To continue reading this article by Don Schellenberg, please click HERE.

USD / SWISS FRANC ANALYSIS and FORECAST

USD/CHF reached a logical downside target of 1.0032, and that was within last month’s second level of support at S2 (S1 on the current chart).

It also appears that since July 31st to the present time there has been a move of five waves, indicating that either a relatively strong corrective rally is due, or that a mid-term low is firmly in place.

At time of writing a few days of bullish activity have occurred, but a close above the recent high of 1.0337 and more importantly above the October high of 1.0452, must happen before we can anticipate a more serious rally.

The Stochastic indicator suggests that a minor cycle high is in place, so at least some days of downward correction will not be a surprise. Any drop below the October 23rd low of 1.0032 would negate bullish probabilities for the near term.


Daily USD/CHF chart as at 4 November 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
MACD – rising strongly, and with bullish divergence.
Stochastic – turning down from around the 80 evel.
SMA200- sloping downwards, far above the current price, at 1.0814.
EMA20- rising from below the market.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Vietnam VNI Index Analysis and Forecast

After a strong performance in the past few months, the Vietnam equity market went into a correction in the last week of October. Despite the bullish trend, the momentum was weak, as indicated by the momentum indicators last month. The benchmark VN Index in Ho Chi Minh found resistance at 633.21 points on the 23rd of October and pulled back to close at 587.12 points. On month-to-month, the VN Index only climbed 6.22 points, the lowest monthly increase in 8 months. The index has just broken below the 30-day short term average support level. The crucial support level to maintain the uptrend as mentioned last month is 520 points.

Click HERE to continue reading this analysis and forecast by Benny Lee.

Crude Palm Oil Futures Commentary and Forecast

The price of FCPO continues to trade in a sideway range between RM2,070 and RM 2,240 per metric ton. Traders can continue to trade at these ranges by buying near the lower range and sell at the higher range. Last month created this opportunity as the price of FCPO went as low as RM2,013 and as high as RM2,250. The price of FCPO is currently at RM2,208. The market did not rally despite re-planting exercise by producers which affects the supply or palm oil into the market.

Click here to continue reading more on FCPO be Benny Lee.

Thailand: SETI Bullish momentum is still strong

The Thai equity market was generally bullish in the beginning of October and the (Stock Exchange of Thailand Index (SETI) made a new 13-month high at 758.55 points. The market turned into a very volatile mode starting middle of last month when investors have generally lost confidence as the country’s positive sentiment was setback again by political protests. The recent speculation that HM the King was dying sparked panic in the market and the SETI plunged 10% from 746 points to a low of 671 points in two days. It rebounded immediately to 738 points in three days but was dragged down again to close at 685.24 points.

The short term trend has started to decline but the long term trend is still up with a support level at 665 points, based on a 90-day moving average. The index is currently at a 60-day average. Momentum indicators like RSI, MACD and ADX have started to indicate bearish strength. The index failed to stay above the 700 points support level and therefore it is expected to test the next support level at 650 points, as mentioned last month. The index is expected to rebound at 650 points and the resistance level is now the previous support level, which is 700 points.


Weekly SETI chart as at 30 October 2009 using NextVIEW Advisor

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

FBMKLCI possibly heading for 1,300

The equity market rebounded technically on the 30-day moving average after correcting from a high of 1270.44 points about three weeks ago to a low of 1233.45 points last week Monday. The low was exactly on the short term 30-day moving average and the FBMKLCI is currently at 1,253.96 points. The market was bullish the whole of last week with fresh news from the US economic data which shows further improvement on the US economy. The FBMCKLI increased 1% from last week and is supported by a relatively good market participation.

In America, new unemployment claims fell more than expected while the Senate approved to extend unemployment benefits by up to 20 weeks and extend homebuyer tax credit. Malaysia economy however is mixed. The World Bank appears to be more confident that Malaysia’s officials as it forecasts Malaysia economy to grow by 4.1% next year after contracting by an estimated 2.3% this year. The government’s estimation was between 2% and 3%, announced in the recent National Budget.

However, Malaysia’s exports and imports dropped on a month-on-month basis for the second consecutive month in September which led to year-on-year decline to start to expand. Malaysia’s Producer Price Index (PPI) in September declined by 9.6% from the same month last year (year-on-year). For the first nine months of this year, PPI also declined by 9.6% from the same period last year.

The US dollar pulled back after a strong rally and commodities prices start soaring again. The US dollar weakens against the Euro dollar, Japanese Yen and most other currencies. This, coupled with improving US economy encouraged price of commodities to move higher. Price of gold hits new high when it went to almost US$1,100 an ounce in COMEX and is currently at US$1091.50. Price of oil which went below US$80 in the last two weeks is slightly above US$80 again. Price of rubber in TOCOM remains the same as last week at JPY$230 while the price of crude palm oil in Bursa Malaysia broker the high of last week and is currently RM2,247 per metric ton, RM50 higher than the previous week.

The uptrend of the FBMKLCI is still well intact after being supported once again by the short term 30-day moving average. The rally last week was supported by an average daily trading volume of 1.3 million shares, an increase of 30% from the previous week’s average. The RSI and Momentum indicators which measure bulls and bears strength were at the mid level in the previous week and begin to slightly increase. The bulls are trying to push forward against the bears. However, the MACD indicator has yet to come above its average and the ADX indicator is still declining.

Despite the bullish move last week, market volatility has slightly dropped. The daily ATR indicator which measures average daily volatility fell from 10 points in the previous week to 8.3 points last week. This simply shows a steady recovery after strong downward correction in the previous week. For the past one month, the average daily volatility has been quite steady at about 10 points a day movement on the FBMKLCI. As the benchmark index trading around the short term moving average, the Bollinger Bands has started to contract since last week. The Bollinger Bands suggests that the market is in a correction and will only start to move if it breaks the top band, currently at 1,272 points or below the bottom band at 1,232 points.

The leading Ichimoku indicator continues to remain firm sideways. There is no indication that the market up trend is going to reverse in the next one month, but the FBMKLCI is starting to move towards the support area or the cloud of this indicator. The uptrend is expected to reverse when the FBMKLCI moves below this support area. The market has just rebounded and the rally is not over. The resistance level which I have been mentioning since last month is between 1,280 and 1,300 points.

There is a possibility of the FBMKLCI moving to 1,300 points especially if it breaks the Bollinger Bands resistance at 1,272 points. If the index not able to break above this immediate resistance, then further sideways move is expected. The index is expected to be supported at 1,230 points. Therefore, there is still short term buying opportunities for traders this week but do not buy if the market goes near 1,300 points.


Daily FBMKLCI chart as at 5 November 2009 using NextVIEW Advisor

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Crude Oil Support level at US$75

The price of crude oil broke above the resistance level of the immediate down trend channel on the 9th October. End September, the price of crude oil was at US$66 and was expected to rebound, as I have commented last month. Oil went above the resistance level at $72 and rallied to $81 before settling at $77 on 30th October. The short term 30-day moving average which was declining last month has started to increase. The price is now above the short to long term 30 to 90 day moving averages.

The price of oil is currently in a minor correction downwards with a support level at$75. Momentum indicators is still above the middle level and this means that the bulls are still in control. It is still early to forecast which direction the price is expected to head in the short term but the oil is expected to stay sideways if the price trades in an immediate support and resistance range between $75 and $82. If the resistance is broken, price is likely going to rally to the next resistance level at $91. If it breaks below $75, most likely it is going back $65 to $70 range (The longer term average)


Daily Crude Oil (on NYMEX) chart as at 30 October 2009 using NextVIEW Advisor

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Rubber (TOCOM): Support level at JPY$200.

Rubber prices (based on Tokyo Commodities Exchange (TOCOM) RSS3 futures) continue to soar 15.5% from JPY$200 last month to a one year high of JPY$231.20 after the price broke the JPY$220 resistance level in mid October. Rising demand and increase in crude oil price helped boost rubber price. Price is in a good healthy up trend. The short to long term 30 to 90-day moving averages continue to increase.

Technical indicators are mixed. The Relative Strength Index (RSI) and Momentum indicators are declining but still above the mid level. This means that the uptrend is still supported by good bullish strength. However, the MACD indicator looks like it is going to cross below its trigger line. Stochastic indicator was overbought and has started to reverse downwards.

Despite a bullish rebound on the 30th October, the price of rubber is expected to correct further with a support level at JPY$220. Price should continue its uptrend if price can stay above this support level. If it breaks the support level, then it may come back to JPY$200 levels. The uptrend may resume if price breaks above JPY$235 resistance level and the next level it is expected to go is JPY$256, but I think it is unlikely going to happen in the next the months.


Daily Rubber (RSS3 on TOCOM) chart as at 30 October 2009 using NextVIEW Advisor

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

CLASSIC AND CONTINUATION CHARTS by DARYL GUPPY

In the newsletter we use several varieties of chart displays. This includes two colour candle stick charts produced with GTE charting. The standard candle display with Metastock and many other US derived programs is to give a four colour candle chart. This, along with our recent articles on candle stick trading methods, has prompted many questions from readers so we look at the differences again.

We also use two colour bar charts. These are different from the two colour bar charts in Metastock and some other US based charting programs and this has left some readers confused. What they see on their screen is not the same as they see on our chart extracts.
The reason is the same as the reason for the difference in the candle charts. Some bar chart displays show Gann continuation charts. This is not quite as important with bar charts because traders do not use a collection of specific bar relationship patterns for trading. However it does impact on the way you see the chart.

INDICATOR – CLASSIC AND CONTINUATION PRICE DISPLAYS

The price bar and the candlestick are the basic ways of displaying price action. They show the open, high, low and close prices. The classic, or original, display examines the relationships between the open and the close on a single price bar or candle stick.

A Gann continuation chart examines the relationships between the prices of today and the prices of yesterday. This type of chart display is also called a swing chart display. The difference in display is very important because it has significant impact on the way we use charts for analysis.

APPLICATION
The classic bar chart display uses today’s open and close to determine the colour of the bar. When today’s close is higher than today’s open, the bar is shown as an up day – usually blue. When today’s close is lower than today’s open, the bar is shown as a down day – usually red. A classic candlestick display only has two colours, usually green and red, or blue and red.



The continuation bar chart display is an adaptation of Gann analysis techniques. In this display the definition of an up or down day depends on the relationship between today and yesterday. An up day is when the close of today is higher than the close of yesterday – usually shown as a blue bar. A down day is when the close of today is lower than the close of yesterday. Other price relationship combinations are shown as filled or unfilled candle sticks.



This means that a day where price opens today at $1.00 and closes today at $1.50 can still be shown as a DOWN day using a Gann continuation chart display. It is very important to know what type of bar chart display you are using so you can decide if it is appropriate for your analysis.

The two chart displays shown above use exactly the same price information for each display. The classic charts are shown on the left. The continuation charts are shown on the right. The analysis messages delivered by the different displays are quite different, even though the price information is exactly the same.

Many default candle stick displays are also Gann continuation displays. This is very dangerous for analysis. Candlestick chart pattern analysis is based on the classic candle stick display that uses intraday-day price relationships. GTE Charting allows users to select Classic or continuation chart displays.



TACTICS
• Use classic bar chart display for pattern analysis and understanding trend behaviour
• Use classic candle stick display charts for the effective application of candlestick analysis.
• Use Gann continuation chart displays for swing trading analysis.

RULES
• Use the correct chart display for the trading analysis technique you are applying
• Select one style of display and stick with it. Do not frequently change display styles. This will create analysis confusion.
• Use classic candle stick charts for candle stick pattern analysis.
• Do not use candle stick continuation charts for candlestick pattern analysis
• Swing trading analysis uses continuation charts
• Classic candlestick display only uses two colours, traditionally black and white candles.
• Continuation candlestick display uses a mixture of two colours and filled and unfilled candles.

ADVANTAGES
• Using the correct display for the selected analysis method enhances success
• Treat with suspicion candle stick ‘experts’ who use candle stick continuation charts
• Treat with suspicion swing trading ‘experts’ who use classic chart displays
• Some people find it easier to understand price activity using a bar chart. Others prefer a candlestick chart. This is a matter of personal preference and has no indicant trading advantage

DISADVANTAGES
• Using Gann continuation candlestick display will lead to incorrect candlestick pattern analysis.
If you want to use 2 colour candle displays in Metastock please refer to our June 6 article in the newsletter that explains how to do this.

To read more articles and commentaries from Daryl Guppy, click HERE

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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

FBMKLCI may move higher this week

The market went into a profit taking mode after the tabling of the National Budget in the previous Friday which most investors see as moderate and balanced for the economy but little for the equity market. The equity market pulled back last week after the benchmark FBMKLCI failed to extend gains after three consecutive weeks of increase with a lower trading volume of 945 million shares averagely on a daily basis. The FBMKLCI closed at 1,241.75 points after rebounding from the intraday low of 1,236.20 points on Thursday. The FBMKLCI fell 18.27 points or 1.4% from last week. The decline was also in line with the correction in global markets.

The Malaysia 2010 Budget has 3 focuses: (i) driving Malaysia towards a high-income economy, (ii) ensuring a holistic and sustainable development and (III) focusing on the well being of the Rakyat. Malaysia economy is forecast to grow by 2%-3% in 2010 and estimated to contract by 3% this year. This was announced in the 2010 Budget tabled by Prime Minister that revealed a 5.6% deficit budget. The Government plans to overhaul its tax revenue and subsidies following the weaker economy and lower income from petroleum. Many believed that it is the final stage of completing the study on the implementation of the goods and services tax (GST).

The US market rebounded sharply Thursday after a better-than-expected third quarter GDP reading. GDP increased sharply to an annualized growth rate of 3.5%. GDP was expected to increase 3.2% after contracting 0.7% in the second quarter. The data shows that the US economy is recovering well and boosted investors confidence. The US dollar has rebounded sharply in the past two weeks against major world currencies. The green back has also risen against the Malaysian ringgit from RM3.33 to a US dollar in early October to RM3.40 to a US dollar.

The upward rally of commodities prices started to halt as the US dollar strengthens. Price of gold found resistance after trading at about US$1,065 an ounce in the futures market in COMEX. It is currently trading at US$1047. Price of oil has also been struggling to increase after hitting a high of US$82 a barrel and is now trading slightly below US$80 in NYMEX. Price of rubber in TOCOM still trades above JPY230 a kg after rallying from JPY200 last month. In Bursa Malaysia, crude palm oil futures pulled back to RM2,195 after climbing to a high of RM2,250 in the previous week.

The FBMKLCI pulled back to the 30-day moving average which has so far provided quite good support to the current up trend. The rebound from Thursday shows that the benchmark index is still being supported at this average. The RSI and Price Momentum trend strength indicators are at the equilibrium and this indicates the pull back is not pressured by selling forces yet. However, the MACD has just crossed below its moving average but at a higher level. The current uptrend is expected to stay intact until these momentum indicators start to decline further.

Daily volatility in the market has slightly increased in the pull back with the Average True Range (ATR) reading increased from 8.5 points to 10 points. Therefore, the pullback is not a strong selling pressure as the average daily volatility should increase 2-fold to indicate strong movement. The FBMKLCI moved towards the middle band (20-day moving average) of the Bollinger Bands, causing the top and bottom bands to contract. This indicates a correction in the FBMKLCI.


Daily FBMKLCI chart as at 29 October 2009 using NextVIEW Advisor

The decline last week has not confirmed a trend reversal as the indicators are still supporting the uptrend. The bullish reversal pattern on Thursday FBMKLCI chart indicates that the market may rebound from the current low. Therefore the benchmark index may move higher this week and has a high chance of testing the high of 1,270 points this week or next week. Failing to test this high means that the market resistance is strong and further downward correction may happen especially if it breaks the immediate support level. Immediate support level is at 1,236 points while a stronger support level at 1,200 points. Major resistance level remains between 1,280 and 1,300 points. Therefore, potential upside is less and traders should strategize themselves to take fast and small profits should they trade in the equity market this week.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Malaysian equity market still bullish but may struggle to move higher this week

After making a new high since June last year at 1,270.44 points, the FBMKLCI pulled back to close at 1260.02 points on Thursday with a relatively lower volume. The benchmark index still managed to close positively from last week with a modest gain of 13.16 points or 1%. There were profit taking activities in the past two days but the pressure was not high to cause the market to decline substantially. The KLCI traded between 1,247.18 and 1270.44 points in the past five days. There were not much news or financial data released last week and all eyes and ears are focused towards the national budget on Friday.

The average daily trading volume was 1130 million shares but volume declined sharply in the past two days with a daily average of 887 million shares. Investors were staying out to wait and see the outcome of the national budget which is expected to be broad-based. Prices of commodities keep soaring as the US dollar plunges further. This worries investors because high commodities prices may dampen economic growth. Regional market performances are mixed and are starting to feel stronger resistance.

The US Dollar is still weakening against major currencies. The Euro dollar is now EUR$1.50 to a US dollar. It has increased 3.4% in less than a month. However, it has strengthened against the Malaysian Ringgit last week. The weak US dollar has pressured commodities prices to climb higher. Gold continues to stay at US$1,060 an ounce while crude oil has gone above US$80 a barrel. Prices of rubber futures in TOCOM and crude palm oil futures in Bursa Malaysia have also risen to JPY225.00 a kg and RM2,210 per metric ton respectively.

The market continues to stay in an uptrend. The FBMKLCI is still being supported strongly by the short and long term uptrend. The rally in October is stronger than the rally in August. The momentum indicators are showing stronger bullish momentum in this rally. The RSI and Momentum indicators pivot highs are higher than the previous pivot highs. The MACD indicator continues to stay above its moving average. There is still little room for the market to move higher because the resistance level is at the range between 1,280 and 1,300 points.

The market volatility remains the same as last week with the Average True Range (ATR) indicator indicating an 8.5 points daily range. The index is still hovering at the top band of the expanding Bollinger Bands which also measures volatility in the intermediate term. This also means that the distribution of price in the past one week is on the high side. This confirms the momentum indicators which indicated strong bullish strength.


Daily FBMKLCI chart as at 22 October 2009 using NextVIEW Advisor

The market has almost fully recovered from the 2008 bear trend and there is still no major correction since the rebound in March this year. It took nearly more than three years (2004 – 2007) for the FBMKLCI to climb from 800 points to 1,260 points and less than a year for it climb the same this year. We have been waiting for at least a major correction to happen but the market is just bulldozing through resistance levels. Analysts, fundamentalists and chartists alike, including yours truly have been revising the resistance levels higher a few times this year. Can the resistance be broken again this time?

Chances of the index testing this level are high but there is low chance that it will stay above it and rally further without a proper correction. The resistance level I talked about since last month is 1,280 to 1,300 points. The market is not expected to immediately turn bearish either, because the leading indicator, the Ichimoku Cloud is still widening and market is supported well. The market may struggle to move higher this week. The immediate support level is 1,220 and if this level is broken, then the market may move lower for correction with the next support level at 1,160 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.