Thursday, May 28, 2009

FOREX: USD/MYR Analysis

In last week’s column I wrote the following: ‘the sideways correction, as viewed right now, has some downside implications to it. A total reversal to the downside is not expected, but corrective action to around 3.4830 is reasonable and probable.’

As it turns out, support around 3.4830 held quite well, with only a couple of intraday spikes going slightly lower, with one daily close as low as 3.4821. For the last four days the market has had higher highs.

USDMYR has moved up to a relatively minor one month old down-sloping trend line. Without question this currency pair is moving into a zone of more resistance from 3.53290 to 3.5671, but there is a good chance that current momentum will carry this pair at least that high and possibly as high as 3.5980 within the next few sessions.

A failure of support around 3.4820 would bring other levels of support into focus.


Daily USD/MYR chart as at 28 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

NextView RSI – rising, in positive territory
Short Term Stochastic – rising
EMA5 – this very short term moving average is rising strongly
TL – the one month old, down-sloping trend line.
R1 – nearby resistance at 3.5670
R2 – 3.5980
R3 – 3.6550
S1 – zone of support from 3.4774-3.4670
S2 – 3.4350

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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.

The Malaysian economy worsens as the GDP contracted 6.2 percent for the first quarter and this prompt PM Najib to provide a new GDP forecast for 2009. the government had earlier estimated the forecast to grow or contract 1 per cent. Now the forecast for year 2009 is 4 to five per cent. See more report from The Star online below.

Do you still believe that Malaysia will not go into recession? Investlobby already mentioned about recession in Malaysia last year.

The negative report does not seem to bother stock investors. The KLCI is 9.6 points at 1,038.08 points as at 4:00 pm.

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N.I.N.E.


From the Star Online:

PUTRAJAYA: Malaysia's gross domestic product (GDP) has been revised to a contraction of between 4% and 5% this year on the back of worsening global economic outlook, says Prime Minister Datuk Seri Najib Tun Razak.

"The revision is due to very weak external demand as well as falling private sector investment and FDI (foreign direct investment) flows," he said at a press conference today.

The conditions of the external environment was "far worse than expected," he added. The Government had earlier estimated GDP to grow at 1% or to contract up to 1%.

Najib said nonetheless, the fourth quarter GDP was likely to return to growth while next year should be in the positive territory.

Any recovery would depend on the improvements of the US and European economies, he added.

Yesterday, Bank Negara released the first quarter GDP figure that showed a contraction of 6.2%, and indicated that the second quarter could be "similar."

Two consecutive quarters of negative GDP growth would translate into a technical recession.

Earlier this year, the Government announced the second stimulus package worth RM60bil, bringing the total fiscal spending to RM67bil.

The central bank, after cutting overnight policy rate three times since last November, has maintained the benchmark rate at 2% in the past two monetary policy meetings.

It believed that the accumulated monetary policy initiatives and measures to enhance access to financing were sufficient to provide support to domestic demand.

At 3.50pm, the Kuala Lumpur Composite Index was down 8.76 points at 1,038.9.

Monday, May 25, 2009

Equity markets around the world including Malaysia remains bullish throughout the week despite having weaker momentum. The KLCI climbed to the expected resistance range between 1,040 and 1,055 points. The KLCI closed at an eight-month high at 1,042.63 points last Wednesday. The KLCI went as high as 1,050.45 points on Thursday but selling pressure pushed the KLCI to close at the intra-day low of 1,035.56 points. The KLCI is up 23.57 points or 2.3 percent on-week and 68.96 points or 7 percent on-month. Average daily trading volume has declined to 1.8 billion shares, a decline of almost 42 percent from the previous corresponding week.

The KLCI is still in an uptrend. The KLCI is above all the three short to long term 30- to 90-day moving averages which are increasing. However, the momentum of the uptrend continues to weaken. The trend has already shown sign of weakness for the past three weeks but is still being supported well. The KLCI is 12.4 percent higher than the long term 90-day moving average which is currently at 921 points, a little higher than the previous corresponding week. This shows that there is some strength in the upward movement on-week.

The momentum indicators like Relative Strength Index (RSI), Average Directional Index (ADX) and MACD are still in divergence with the current trend. These indicators that measure price rate-of-change indicate slowing momentum in the uptrend. The increasing volume for the past eight weeks when the KLCI bounces off the low has started to become a lot weaker. This too signals a weaker momentum in terms of price-volume relationship.

Market volatility is higher than average but remains firm. The Bollinger Bands width is almost the same as the previous week. Based on this indicator, the KLCI is still bullish because it still stays above the middle band which is a 20-day moving average. The shorter term volatility indicator, the 3-day Average True Range (ATR) has slightly increased and this indicates that volatility in the KLCI has increased in the past few days. The Stochastic reading is back to the overbought reading for the fourth time since late March this year. The last time this happened when the market was bullish from 2006 to late 2007.


Daily KLCI chart as at 21 May 2009 using NextVIEW Advisor Professional


The KLCI is currently at a crucial resistance level between 1,040 to 1,055 points based on the analysis I made few weeks ago. There are more signs that a pullback is expected any time soon. The volume peaked last week and price was almost at the peak if not for last Wednesday’s rally. The momentum indicators have not shown any improvement since going against the trend 2 weeks ago. The next resistance level at 1,076 points is a Fibonacci level that once broken, signals the end of the long term down trend.

Support level is now between 920 and 935 points, based on the 30 and 60 day moving averages. Buying at current levels imposes high risk to the investor because the upside is lesser than the downside, technically. However, many investors are willing to take higher risks because price keeps getting higher. It is always tempting to get into the market now especially those who are still in the sidelines, but be cautious and wait for a pullback before making any decisions for short term trading/investment. My long term forecast is still between 600 to 650 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.

Saturday, May 23, 2009

Gold is rapidly moving closer to last week’s #2 resistance target. (R1 on today’s chart). That is also the top of the parallel channel.

This resistance level is sufficiently strong that I expect some downward pressure from there. It is an important level to watch, and for some traders to consider taking at least partial profit off their positions.

If there is sufficient strength and momentum to breach R1 convincingly, then R2 will be the next logical upside target. Failure to penetrate R1 could result in a multi-day retreat downwards.


Daily Gold chart as at 21 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

SMA200 – rising weakly around 867
EMA20 – rising strongly
Stochastic – overbought and rising
Li’s Sandwich – indicates resistance around the R1 level on the chart.
R1 – immediate resistance at 950-960.
R2 – 976
S1 – 917
S2 -900

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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.

Friday, May 22, 2009

FOREX: EUR/USD Analysis

There haven’t been any major surprises in the price movement of EURUSD since last weeks’ commentary, except that price has reached upside resistance sooner than I expected.

The Bearish Engulfing candle mentioned in last weeks’ column performed as expected – “…this does not mean that a major reversal is underway, but there is at least the possibility of a few days of sideways and corrective price movement”.

That did occur. Three days after the Bearish Engulfing signal, the market had broken below the upward sloping trend line but found strong support at 1.3422, almost exactly at last week’s S2 level on the chart. From there the market thrust upwards to reach the R2 level and achieving a two-month month high.

The market is reaching levels where fresh resistance can be expected, so at least some minor corrective price action can be expected to occur between the current price level (1.3806) and 1.3930.

In any case there is a strong possibility that the market will reach to around 1.4170-1.4200 within the next couple of weeks.


Daily EUR/USD chart as at 21 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

SMA200 – this long term indicator is still sloping down, around 1.3190.
EMA20 – up, in support of current price movement.
MACD – up in positive territory, but with weakening relative momentum.
Stochastic – rising again within overbought levels.
R1 – immediate resistance at 1.3930.
R- 1.4200
S1 – 1.3670
S2 – 1.3570
S3 – 1.3422

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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.


APPLES AND ORANGES

Consider this: Malaysia’s economy managed to grow, albeit at a slower pace of 0.1%, in the fourth quarter of 2008 (4Q08) despite major economies including its neighbour experiencing severe contraction – the US contracted by 6.2%, the Euro area shrank 1.5% and Singapore contracted by 16.9%.

It is rather mind-boggling to see such figures, where Malaysia considerably outperformed the other countries during the final quarter of last year. Not that we do not believe that Malaysia is superior to the other three countries as its banking system was untainted by the global financial crisis because it was not exposed to the sub-prime mortgage issue. It is just the extent of the out-performance.

But analysing it further, there is in fact a reason for such an out-performance. It is simply because in this case the apple is not compared with other three apples but rather with three oranges.

Why?

In Malaysia, the gross domestic product (GDP) figures are always released in the form of year-on-year change. The 0.1% growth is arrived at when the real output in 4Q08 is compared against the real output in 4Q07.

However, in the US, Euro area and Singapore, as examples shown above, the figures are based on the percentage difference between the real output in 4Q08 and the real output in 3Q08, seasonally adjusted. For the US and Singapore figures, the figures are annualised.

Hence, while one can compare the performance of the US and Singapore economies when using the above figures, one should not compare them with the figure on the Euro area as it was not annualised and on Malaysia’s economic growth as it was y-o-y and not q-o-q.

For the US economy, the right number to use for comparison to Malaysia’s 0.1% GDP growth in the 4Q08 should be the 0.8% contraction it experienced between the 4Q07 and 4Q08. For the Euro area, it would be its y-o-y contraction of 1.3% in the 4Q08. And for Singapore, the republic’s economic output contracted by 3.7% in the 4Q08, y-o-y.

Hence the right comparison for Malaysia’s 0.1% GDP growth in the 4Q08 should be the contraction of 0.8% in the US, 1.3% in the Euro area and 3.7% in Singapore.



As said earlier, we are not doubtful of the strength of the Malaysian economy, but it is just whether she considerably outperformed the others. If someone wants to compare the 6.2% output contraction in the US, 16.9% in Singapore and 1.5% (not annualised) in Euro area to that in Malaysia, he should calculate Malaysia’s output in the 4Q08 against that in 3Q08. It is also a contraction, by 3.6%, not annualised.

But then, there will be an argument that such a figure may not be adjusted for seasonal factors, such as the number of days in the fourth against the third quarter, the number of public holidays and weekends, and other factors.



Notwithstanding the above argument, and for comparison, Malaysia economy registered growth both y-o-y and q-o-q in 4Q07, that is by 7.3% and 0.8% respectively. Likewise in 4Q06, growth rates were 5.3% and 0.3% respectively for Malaysia. However, one important observation is that in 4Q08, Malaysia economy experienced the first q-o-q contraction in the fourth quarter since 4Q00.

Chart 1: Malaysia Real GDP


Perhaps it is high time for Bank Negara Malaysia to also include quarter-on-quarter performance of the country’s economic output, seasonally adjusted, in its Economic and Financial Development quarterly report. Although the q-o-q figures, yet to be known whether or not they are seasonally adjusted, are available in the statistics table released, most layman investors and traders certainly refer only to the report instead of the tables.

Such an inclusion in the report would certainly allow traders and investors to use the right economic figures when comparing to similar figures of other countries, as well as for investment decision at macro level.

(Note: The 1Q09 GDP numbers for Malaysia are expected to be released not later than 27 May 2009.)

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Article Contributed By Ameer Ali Mohamed. Ameer is Director, Financial Research of NextVIEW. He has a total of 20 years experience as a corporate journalist, investment analyst and fund manager, including as research head of two stockbroking firms and CEO/CIO of a funds management company.


Republished with permission.
This article was published in the Just Say It column in Shares Investment (Malaysia edition) May 2009. You can get the latest copy of Shares Investment (Malaysia edition) at leading bookstores in Malaysia.

Tuesday, May 19, 2009

The price of crude palm oil in the futures market (FCPO) has been very bullish in the past one month, despite being overbought and having a technical resistance at RM2,540 per metric ton. The price of FCPO surged RM204 or 8.3 percent on-month. It went as high as RM2,799 twice this month but failed to break above this level before settling at RM2,663 on Friday. The surge in price was a result of speculation because of improving export figures. The price has retraced to almost 50 percent from the high of RM4,486 in March 2008 to a low of RM1,331 in October 2008.

The weakening price movement in the past few days despite strong fundamental factors shows that the market has already anticipated these factors and is already discounted in the current price. There is a strong resistance at RM2,800 and to go beyond this level, the market needs a much stronger catalyst to boost the price of CPO.

The price of FPCPO is still in a very strong up trend, but a little weaker from last month. The short and long term 30- and 90-day moving average is still up but the price is getting nearer to the short term average. The weaker momentum is also detected in momentum indicators like the Relative Strength Index (RSI) and the Average Directional Index (ADX). Both these indicators’ values are declining. The daily average volume for mid-April to mid-May is 12,700 contracts, a 44 percent increase from the previous corresponding month. The high increase in volume with price not getting higher also indicates that the price of FCPO is toppish.

The price of FCPO is currently 21.3 percent above the 15-week moving average. It was 23 percent above this average last month. The decline in the price momentum this week was the first in eight weeks. The 15-week average is currently at RM2,194 while the longer term average (30-week average) is at RM1,910. The presence of “doji” Japanese Candlesticks chart patterns in the past two weeks on the weekly chart shows that the market is toppish and a correction is likely going to happen.

The resistance at RM2,800 is strong because it was tested twice this month without being able to break above it. With weaker bullish momentum and toppish price patterns, the price of FCPO is expected to go into a downward correction this month, with a higher confidence. The price is expected to pull back to the averages between RM1,900 and RM2,200. Therefore a sharp pull back is expected. There is a saying in the market that if price goes up sharply, it falls sharply also.


Daily FCPO chart with volume as at 15 May 2009 using NextVIEW Advisor Professional

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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.

Monday, May 18, 2009

The bullish momentum in the equity market has started to ease last week after the KLCI went to a high of 1,037.81 points on the 7th of May. The market was in a trading range. I mentioned last week that the KLCI resistance is at 1,040 two weeks ago the KLCI has not broken above this level. Last week, the KLCI closed at 1,014.21 points on Thursday. The KLCI is down 12.57 points on week. Trading volume continues to increase another 35% on week with a daily average of almost 3.1 billion shares. Average daily trading volume in the past week and the week before are 2.3 billion and 1.7 billion shares respectively.

The market sentiment has started to be divided now. The market was bullish for the past 8 weeks. Despite having stronger volume, the KLCI has not gone up. This shows that there is a selling pressure that prevents price from going higher although there is still strong buying. The selling pressure is generally caused by profit taking activities by short term traders as the market has given them good profits from the 8 weeks rally. Other markets in the region faced similar situation with higher volatility.

The uptrend is still intact even for the short term but the bullish momentum has somewhat getting weaker. Last week, there were already little signs of weakness in the uptrend momentum. The KLCI is still high above its long term 90-day moving average, which is currently at 915 points. The KLCI is currently 10.6 percent above this average, 2.4 percent lower than the previous week. This shows that the momentum has started to become weak.

This can be verified by the declining momentum indicators like Relative Strength Index (RSI), Momentum and Average Directional Index (ADX). Another sign of the uptrend weakness is that the weekly MACD histogram has started to decline after 7 weeks of increase. Furthermore, there is a good increase in volume but the market does not go higher. All these indicators are showing a divergence against the KLCI trend and this means that the KLCI up trend is weak.

The market volatility has started to contract. The Bollinger Bands width has started to decline this week. The KLCI is moving away from the top band. These indications from the Bollinger Bands show that the KLCI has started to go into a correction. The 3-day Average True Range (ATR) has started to decline and this shows very low volatility in the past week. The Stochastic indicator which has been indicating overbought has now crossed below its 80% line, which means that the KLCI is expected to correct downwards. The last time it crossed below this line was on the 28th of April but the KLCI just went down for two days before continuing the uptrend again. The difference now and the 28th of April crossover is that the momentum indicators are showing divergences or weakening momentum.

The resistance in the KLCI has started to become stronger. Increased volume without good increase in price provides the first indication. The second indication is from the momentum indicators which are now in divergence against the KLCI trend. The third indication is the volatility, which is declining and a declining volatility means that the market is uncertain. Resistance remains at 1,040 to 1,055 points and there is a very low chance that the KLCI can break and stay above this resistance level.

With a much weaker momentum last week, the KLCI is expected to stay sideways or decline. The support level is at the mid- to long-term averages between 915 to 925 points. I am going to say once again that investors should wait for a pull back around this resistance level if they want to buy. In the long term, I am still bearish with the market as long as the KLCI stays below the 38.2% long term bear trend resistance level at 1,076 points. The long term target is now between 600 to 650 points, higher than my initial target of 550 points.


Daily KLCI chart with volume as at 15 May 2009 using NextVIEW Advisor Professional

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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.

Thursday, May 14, 2009

Strategy is understanding the season. Tactics are deciding if we need to take an umbrella today or if we should put on sunscreen. Often strategy and tactics are in agreement – using an umbrella in Autumn. Sometimes they are less compatible which is why people in Autumn are also prepared for quite warm days. The market condition is similar. The strategy messages are sounding caution, but tactically there are many opportunities. Part of this confusion comes from the difference between a rally and a trend.

But first, here is a chart that continues to frighten us. The first is the DOW performance during 1929-30. It shows the fast rally rebound that lifted the market 48% before dumping it again into the collapse of 1930 and 1931. The market also rose again with rallies of between 23% and 35% on several occasions in 1930 and 1931. Great trading, but shocking investment opportunities. This type of situation remains a possibility even in these apparently ebullient times where many public figures are pronouncing the end of the recession. These are in many cases the same figures who were unable to identify the start of the recession.




The second and third chart highlight the difference between a rally and a trend. We are accustomed to thinking of a rally as a short lived up move. Time is a factor in separating a rally from a trend, but it is not the most important factor. The difference between a rally and a trend is the way the trend tests and retests a rising support line, or trend line. A trend has a pattern of rally, retreat, rebound, rally and retest of the trend line. This is shown in Chart A which is the Hang Seng index. The April retreat is a significant ‘stress test’ of the trend and it finds support at the lower edge of a long term consolidation support and resistance area that has been developing since September 2008.



There are two other important supporting features. The first is the consolidation pattern of sideways trading in a band over several months from October through to March. This provides a foundation for the trend breakout.

The second is the character of the retreat and rebound. The rebound develops from the upper edge of the long term GMMA. Additionally, as this retreat develops there is no compression in the long term GMMA. The market absorbs this retreat. Investors step in as buyers because they believe this retreat is an opportunity to join the rising trend. The width of the long term GMMA shows investors support for the trend.

Rally behaviour is different. A rally has a single trend line that has not experienced any significant rally and retreat behaviour. This is chart B, the DOW. It is difficult to place an accurate trend line on the DOW chart. The trend line that most correctly defines the behaviour is shown. Note the key difference. There is no rally, retreat and rebound behaviour in this period. It is simply a series of minor tests of the support function of the trend line. This behaviour underlines the rally characteristics of the DOW.



So here is the nasty question. If a trend includes a rally, retreat and rebound then where is the rebound point for the DOW when the current rally collapses? In this ‘stress test’ where is the bottom lime located? There is weak support near 7500 based on the spike lows in November. Or there is support near 6500 from the March 2009 lows.

The separation in the long term GMMA is narrow. This shows there is not strong support from investors. This narrow band also provides every weak support for any market retreat. Unlike the Hang Seng there is a low probability investors will step into the market and buy as the index falls. There is a higher probability they will join the selling and accelerate the continuation of the downtrend.

Fear and caution should not blind us to the opportunity to identify good trading opportunities. There are excellent returns available from rally and prolonged rally behaviour in individual stocks. However, the strategic outlook suggests it is too early to treat these as investment opportunities. We trade for profit and act with caution.

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

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Daryl Guppy, well-known international financial technical analysis expert. Appears regularly on CNBCAsia and is known as "The Chart Man". He is an equity and derivatives trader and author of books including Share Trading, Trend Trading and The 36 Strategies of The Chinese For Financial Traders. He has developed several leading technical indicators used by investors in many markets. His weekly analysis newsletters get favorable comment in Asia and Australia.

Wednesday, May 13, 2009

Share prices on Malaysia stock exchange closed marginally lower Tuesday as buying activities in the afternoon session limit the earlier losses.

The benchmark KLCI eased 2.48 points or 0.24% to 1,023.02 points. It opened 5.32 points lower at 1,020.18 points, and traded between 1,013.36 and 1,023.73 points during the day.

Share prices on the Singapore stock exchange closed marginally higher on lower volume Tuesday following buying activities in the afternoon session that pulled the market out of the red.

The benchmark FT Straits Times Index added 12.03 points or 0.56% to 2,178.13 points. It opened 1.67 points lower at 2,164.43 points and traded between 2,135.37 and 2,191.51 points during the day.

More...


In the United States (Excerpts from Yahoo.com) :

Stocks ended mixed but well off their lows Tuesday as early concerns about a barrage of stock offerings eased and rising oil prices lifted energy stocks. The Dow Jones industrials rose 50 points, while broader indicators fell.

Investors also pulled money from technology stocks after the Nasdaq composite index closed at a six-month high last week. The slide Monday and mixed finish Tuesday makes it difficult to tell whether Wall Street might be able to restart its stalled two-month rally.

The Dow rose 50.34, or 0.6 percent, to 8,469.11 after falling 155 on Monday. The S&P 500 index slipped 0.89, or 0.1 percent, to 908.35 and the Nasdaq fell 15.32, or 0.9 percent, to 1,715.92.

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N.I.N.E.

Tuesday, May 12, 2009


Weekly KLCI chart with volume as at 8 May 2009 using NextVIEW Advisor Professional

Technical analysis is under a test. The test is whether history will repeat itself from the price-volume pattern. If it does, KLCI is expected to fall to 650 points. However, the current momentum indicates that the KLCI can go higher. The KLCI is currently near the double bottom chart pattern formation target at 1,040 points. That is the resistance the KLCI has to overcome to continue its bullish momentum and the next resistance is at 1075 points, a Fibonacci 38.2% retracement of the longer term bear trend.

Failing go above 1,040 points resistance may cause the momentum to weaken further and history might be repeating itself. Personally, I have already been cautious since last month as I was expecting sharp correction downwards and shall continue to do so this month. Buy when market dips, not when it is flying high like this. A better level to buy is when the KLCI goes to the longer term averages between 920 and 950 points. Remember, there is a potential of history repeating itself and a stop loss should be in placed if KLCI falls further below 920 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.

Monday, May 11, 2009

It’s my view that the strong up-move that began in mid-November, 2008, was actually part of a larger corrective formation. In fact all of the movement of Gold since then, both up and down, has been corrective in nature.

If that is the case, in not too many weeks we should begin to see a decline in gold value below the recent low set on April 17th at 864.50.

Meanwhile, however, the market is rising. The first upside target is the top of the rising channel which is currently around 936. A further rise to around 950 is a real possibility. These areas should exert significant resistance. If and when the market reaches there we should pay careful attention to the market reaction, whether positive or negative.


Daily Gold chart as at 7 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
NextView RSI – rising
Stochastic – rising
Li’s Sandwich – the outer bands indicate possible levels of support and resistance.
Channel – the channel creates a natural first target for the rise in gold’s value.
R1 – nearby, relatively weak resistance, at 918.50
R2 – 935.
R3 – 951.
S1 – 880.50
S2 – 864.50

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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.


The bulls are running amok in the equity markets. Buying was broad-based as investors are becoming more confident in taking higher risk. The market was bullish the whole week. On Thursday, the KLCI opened on a bullish note at 1,031.83 points and went as high as 1037.81 before settling lower at 1023.47 points in the later session. The KLCI nearly tested the 1,040 points resistance level that I have mentioned last week. Trading volume was high at 3.67 billion shares exchanges hands. Equally interesting is the political scene in the state of Perak where a ruckus was created between two opposite political parties both claiming to be the legal government of the day in the state assembly.

Markets in the region have also been very bullish especially in Hong Kong and Taiwan. Even Thailand which is on a political dilemma was up. The KLCI rose 56 points or 5.8 percent on week, the highest since late September 2008. Trading volume continues to surge on week. The average daily volume for last week was 2.3 billion shares, up 35 percent from the previous week’s average volume of 1.7 billion shares. Trading volume on Thursday was exceptionally high, 3.6 billion shares exchanged hands.

The up trend continues with a strong bullish momentum and the KLCI is diverging further away from the averages. The KLCI is 13 percent above the longer-term 90 day moving average (90-SMA) which is currently at 905 points. The KLCI is now 13% above the 90-day average. The KLCI is also above the institutional benchmark average of 200-days. The KLCI has only retraced about 28% from the high of 1,524 points early 2008 to a low of 801 points in October 2008. Breaking above the one third retracement would be a little difficult and it is often used to show that the trend is really strong. The 33.3 percent is around 1,055 points.

There are little signs of a weakening uptrend. The Relative Strength Index (RSI) and Momentum indicators’ peaks are getting lower. These indicators readings are still favouring the bulls. The weekly MACD Histogram is still increasing. The declining ADX indicator last week has increased again this week. Therefore, the momentum of the KLCI trend is generally strong but showing little signs of weakness.

The KLCI is hovering around the top band of the Bollinger Bands which also means that momentum is strong upwards. The bands width which measures volatility stays firm after a slight decline last week. The firm volatility supports to ongoing uptrend. The 3-day Average True Range (ATR) indicator is strongly increasing, showing high volatility in the short term. The Stochastic indicator which was below the overbought line of 80% last week started to go above this line again. The KLCI has been overbought for the past one month in the short term.


Daily KLCI chart as at 7 May 2009 using NextVIEW Advisor Professional

The exceptionally strong volume with a slight decline in the KLCI momentum indicates some resistance. The KLCI may re-test the 1,040 to 1,055 points resistance level but there’s a very low chance it will be able to stay above it. It is not wise for investors and traders to jump into the stock market now. It’s better to wait for a pullback to around 910 to 930 points level. I mentioned that the market is expected to be positive last week but not this week. A small pullback is expected.

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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.

Sunday, May 10, 2009

FOREX: EURO/USD analysis

This currency pair has been caught in a wide trading range for the past three weeks, in between the high of May 6th at 1.3581 and the low of May 22nd at 1.2885.

From March 19th to May 30th this market moved down and sideways within channel lines. Many traders see this as a flag pattern formation. In my view the formation is certainly not ideal since the internal waves are not quite normal for a flag. Generally, with an ideal flag, the break out would be in the direction of the so-called flag pole, which in this case would be up, but so far the break out above the upper channel line has been less than enthusiastic.

It seems that the best thing to do is identify levels of resistance and support with probable near term targets if on or the other level is exceeded.

One are of support that should prove significant is around 1.3100. A close below this level could seriously damage the potential for near term bullish action.


Daily EUR/USD chart as at 7 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
Stochastic – declining from it’s overbought level.
MACD – in positive territory but flattening out.
R1 – 1.3400
R2- 1.3740
R3 – 1.4180
S1- 1.3100
S2 – 1.2920

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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.


Thursday, May 7, 2009

Oil has developed a trading and conciliation band behaviour. This is clearly observed on the NYMEX (New York Mercantile Exchange) Crude Oil weekly chart. The width of the band is now defined by the resistance level that developed near $53.00. This is a little distance below the historical resistance level near $56.00. The lower edge of the trading band is near $33.00.

Towards the end of 2000 oil developed an equilateral triangle pattern. This is a pattern of indecision. The breakout from this pattern has a 50% probability of moving up or down. The important development of this pattern has been the price behaviour in relation to the middle point of this pattern. The middle point or apex, of this triangle pattern is located near $42.00.

The breakout from this equilateral triangle was not very successful and resistance developed near $53.00. The way the market retreats after the breakout gives a good indication of how this long term trend will develop.

It is a bullish condition when the market retreats to $42.00 and finds good support. A rebound from this support level has a high probability of successfully testing resistance near $56.00. A very strong rebound has the ability to move higher and retest resistance near $70.00.
If support near $42.00 is not successful then the market will fall to retest support near $33.00. This is a bearish outcome and suggests that oil will continue to trade inside the trading band for many months. This would develop a long term consolidation pattern between $33.00 and $56.00.

The price move from $33.00 to $42.00, or higher to $56.00 gives many profitable trading opportunities. It is important to remember this is part of the normal pattern of rally and retreat behaviour inside a trading band. Price can fall very quickly from resistance near $56.00.

A long term change in the trend will develop when the price is able to move above resistance near $56.00. This is currently a low probability because the value of the long term Guppy Multiple Moving Average indicator on the weekly chart is near $56.00. This shows a strong resistance level. On the daily chart the long term GMMA shows the uptrend pressure is weak.

For the next several months oil may continue to trade in the upper area of the trading band between $42.00 and $56.00 but there is a low probability the price will successfully move above $56.00. Price may fall below $42.00 but there is a reduced probability the price will continue to fall all the way to $33.00 so traders will be ready for a price rebound to develop.



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

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Daryl Guppy, well-known international financial technical analysis expert. Appears regularly on CNBCAsia and is known as "The Chart Man". He is an equity and derivatives trader and author of books including Share Trading, Trend Trading and The 36 Strategies of The Chinese For Financial Traders. He has developed several leading technical indicators used by investors in many markets. His weekly analysis newsletters get favorable comment in Asia and Australia.

Morning Market News

Share prices on Malaysia stock exchange closed at its 7½-month high Wednesday, thanks to the positive performance of the regional bourses, despite a weak opening in the morning session.

Share prices on the Singapore stock exchange continued with its strong rally Wednesday, with its benchmark index gaining more than 5% and continued as one of Asia’s best performing equity markets for the day.

Wall Street closed higher Wednesday led by finance stocks, as the report on stress test due Thursday suggested major banks are better capitalized than earlier thought coupled with better than expected job loss figure.

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Wednesday, May 6, 2009

Morning Market News

Wall Street closed marginally lower Tuesday in a relatively tight trading market as traders took profit from the recent run-up and the wait and see stance by investors pending the bank stress test report due Thursday. The Dow Jones Industrial Average eased 16.09 points or 0.19% to 8410.65 point.Click here for more

Share prices on Malaysia stock exchange closed marginally lower Tuesday despite a strong opening in the morning session, but its benchmark index managed to close above the 1000 level. Click here for more

Share prices on the Singapore stock exchange continued with its upward trend Tuesday, gaining for the fourth straight day and maintained as one of Asia’s best performing equity markets for the day. Click here for more

Monday, May 4, 2009

It was a crazily bullish day in the Asian markets. Investors are so confident and their risk-appetite increased from the better-than-expected corporate earnings smaller contraction in the economic growth. The global manufacturing cycle seems to be increasing in momentum. Investors have set aside worries about the swine flu (H1N1) outbreak which could turn into a global pandemic.



Taiwan benchmark index soared 5.6 percent, after increasing more than 6 percent last Friday. China's PMI data seems to show recovery for the economy. Investors see mega deals that would spur Chinese investments in Taiwan.

Other big gainers in the region include Hong Kong and Singapore. Hong Kong Hang Seng Index surged 860 points or 5.54 percent to close 16,381 points, breaking above the 16,000 points technical resistance level. Singapore FTSE Straits Times Index rose 108.43 points or 5.56 percent to close above the 2,000 points psychological resistance level at 2,028.71 points.

China's Shanghai Composite closed 3.32 percent higher at 2,559.51 points. Despite the political uncertainty, Thailand's SET Index closed 2.96 percent higher at 506.26 points. Kuala Lumpur Composite Index went up 1.88 percent to close at 1009.38 points while Japan's Nikkei up 1.7 percent at 8.977.37 points on the first of May. Japan is on holiday for three days starting today.

Commodities prices up as well
U.S. crude oil went up 25 cents to $53.45 a barrel and gold price was up $8 an ounce at $893.80.

The US Dow Jones Industrial Average is expected to extend its rally after increasing 44.29 points on Friday. The Dow is currently at 8,212.41 points and is expected increase 2 percent today. NextVIEW's Chief Market Strategist Benny Lee added that the US may extend the gains this week before move into a correction.

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N.I.N.E.
The swine flu outbreak has caused equity markets to sneeze including Malaysia. The KLCI fell heavily on Monday and extended to Tuesday. The KLCI was bullish on Friday and closed almost at the six-month high at 992.68 points and in the next two days, declined 27 points to settle at 965.70 on Tuesday. The market rebounded on Wednesday after a bearish session in the early morning. The KLCI went as low as 952.37 points in the early morning but later climbed to close at 967.46 points. Markets in the region advanced strongly.

The KLCI remained almost unchanged on-week. The KLCI was at 968.58 points last Wednesday. However, the KLCI is up 98 points or 11.3 percent on-month. The KLCI level a year ago was at 1,283.65 points. The market has become more active now and trading volume continues to grow. The daily average volume for a week has soared to 1.7 billion shares, 54% higher than the daily average in the previous corresponding week. More than two billion shares exchanged hands on Friday and Monday, something we have not seen in a long time.

Investors are gaining more confidence now after Prime Minister Najib announces liberization on the finance sector after doing so on other services sub-sectors the previous week. Other positive developments include the US Federal Reserve saying that the recession has started to ease and Japan’s industrial output rose for the first time in six months. Production in Malaysia has improved as well with the Labor department getting more requests from manufactures for production workers. The securities commission and Bursa Malaysia is expected to announce major changes in the equity market next week which may be viewed as positive.

Is this really a beginning of a bull run or the market is still in a long term down trend correction? The KLCI continues to break above technical resistance levels for the past few weeks without having a rest. Volume has increased tremendously. Analysts including yours truly are being strongly tested. Ever since the KLCI broke the 940 points resistance level which changed my bearish forecast, the KLCI continues to climb without looking back. The next resistance of 970 points was also taken out. Is the KLCI going to take out the next resistance level, and where is it?

There is no doubt that the trend is up in the short term. However, it is still unclear for the long term trend because it is in a transition period. The short to long term 30- to 90- day moving average continues to increase and the KLCI stays above these averages. The KLCI also continues to stay above the 200-day moving average. However, the KLCI has only retraced about 24% from the high of 1,524 points early 2008 to a low of 801 points in October 2008. The uptrend is still in transitional stage.

There is a high chance for the market to break new highs and test resistance levels because of the strong bullish momentum. The daily Relative Strength Index (RSI) and the weekly MACD indicators are still making new highs and this means that the uptrend is still strong. However, the daily Momentum indicator is showing divergence. The ADX has started to decline last week after advancing since the beginning of April. If the KLCI can go above 1,000 points level, then all these indicators will be in convergence again.

The recent pull back has caused the Stochastic indicator to go below the overbought level of 80. It has been above this level since late March. Nevertheless, the Stochastic is still considered overbought because of the relationship between the KLCI and the averages. The distance between the KLCI and the 60 and 90 day average is 67 points or 7.4 percent. The volatility in the longer term has declined with the Bollinger Bands width declining moderately. However, the short term volatility has increased as the 3-day Average True Range (ATR) indicator has increased in the past few days.


Daily KLCI chart as at 29 April 2009 using NextVIEW Advisor Professional

Based on current developments fundamentally and technically, there is a high chance that the KLCI may increase further in the short term. The next level for the KLCI to test is 1,040 points, which is a price target objective based on a 6-month double bottom chart formation. As market sentiment is very bullish, expect smaller pull backs rather than a bigger correction until the momentum indicators start to weaken. Therefore the KLCI is expected to be in positive this week.

In the long term, I am still bearish about the market. If the KLCI stabilizes above the 1,000 points level, then I may not be bearish anymore. Therefore, with more information when the time comes, I will make the necessary adjustments. Current data is still not convincing enough to believe that the market has started a bull run.

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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.