KLCI EXPECTED TO REMAIN SIDEWAYS NEXT WEEK

The political tsunami in Perak seems to be much hotter than the stock market. The market generally went sideways last week. In my previous article I wrote that the KLCI is expected to be traded in a range between 860 and 890 points. The KLCI was even weaker and traded between 871 and 887 points. Market sentiments remain weak as economic data continues to be gloomy. Trading volume remained firm as compared to last two weeks but relatively lower than last month. The declining volume has caused Bursa Malaysia Bhd’s net profit fell 56.6% to RM104.4 million in its financial year ended Dec 31, 2008.

The KLCI is currently at 879.95 points. With not much development in the market, the KLCI is still in a major down trend but up trend in the short term. This simply means that the market is in a down trend correction and this is confirmed by the wedge chart pattern formation on the chart. The KLCI is still within the support and resistance level of a wedge chart pattern. The KLCI is currently near the support level. The momentum of the short term up trend remains firm but there are already signs of weaknesses. The Relative Strength Index (RSI) indicator remains in convergence with the KLCI, which indicates strength of the trend. However, the PDI has been below the MDI since last week in the ADX indicator. The market volatility has eased after expanding since mid December. The Bollinger Bands which measures volatility continues to contract.


Daily KLCI chart as at 5 February 2009 using NextVIEW Advisor. Click on chart for larger view.

I believe that the market is still full of uncertainty and lacking confidence. The chart indicates this sentiment with declining volume and volatility. The short term target at 940 points may not materialize because the market is expected to remain sideways with a downward bias next week. However, it is still valid until the 860 points support level is broken. I am expecting the KLCI to continue to trade within the trading range set in the previous week, which is between 860 and 890 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.