Malaysia KLCI: Rebound to Continue

Market volume was slightly higher this week. Selling pressure has eased and optimistic investors were hunting for bargain stocks on fundamentally strong companies. The KLCI still remains in a down trend. The short to long term averages are currently at 880 points. The averages have been flat this week. The KLCI has created lower short term swings after a coming out of a 3 months correction and the bears claimed victory.

The weak rally has not really affected the bearish momentum. Although indicators like RSI and Momentum have risen, it is still not above the mid-point levels of these indicators. The mid-point level for these indicators is equilibrium between the bears and the bulls. The RSI indicator is at 39.3 and the Momentum is at 97.2. The mid-point for RSI and Momentum is 50 and 100 respectively. The ADX indicator is still increasing showing that the bearish pressure is still strong. The different between the PDI and MDI has started to become narrower now.

Market volatility remains firm this week after expanding two weeks ago. The KLCI has finally rebounded of the bottom band, but still below the middle band. The Stochastic Oscillator has started to increase this week and went above its 3 days moving average. This signals a short term price reversal up. The current rebound looks insignificant on the weekly chart. The weekly MACD histogram is still declining. The histogram measures weekly momentum.


Daily KLCI chart as at 19 March 2009 using NextVIEW Advisor. Click on chart for larger view.

With the positive short term technical readings, I would expect the rally on the KLCI to continue and test the 880 points resistance level next week. Fundamentally, the equity markets are expected to respond positively from the latest economic developments. The short term forecast at 800 points is still valid if the KLCI stays below 800 points. Therefore, my short term forecast of the KLCI is sideways with a trading range between 800 and 880 points. The long term forecast is still bearish as long as the KLCI stays below 940 points. The long term forecast remains at 550 points.

****

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.