Kuala Lumpur Stock Market: Sentiment still bullish

The market extends its bullish rally last week as sentiments continue to improve. The FBMKLCI gained for the 4th consecutive week. The FBMKLCI rose another 17.52 points or 1.45% from the previous week to close at 1,218.80 points, another high for this year. The benchmark index traded in a narrow trading range between 1196.46 and 1,220.47 points. With a long break coming ahead of the Hari Raya Aidilfitri public holiday, market volume was slightly but surprisingly higher than the previous week. Total trading volume for last week was 731 million shares as compared to 702 million in the previous week.

Market sentiment was a little bullish following some improvements in the US economy. Jobless claims were lower and housing starts in August was the highest in nine months based on the Labor and Commerce Department findings respectively. Regional manufacturing rose to a 20-month high, according to the Philadelphia Fed Index. The Fed chairman statement that the worst in the US economy is over boosted investors confidence. The benchmark Dow Jones Industrial Average closed at the highest level this year at 9,738.92 points. In Malaysia, vehicle sales rose 2.8% on-year but fell 6.5% on a monthly basis. Normally, vehicle sales would rise before the Raya holidays but consumers are cutting back on their spending and becoming more cautious.

The US dollar continues to weaken and have caused prices of commodities to increase despite some declines in exports from producing countries. Price of crude oil futures maintains above US$70 a barrel and is currently at US$72 in NYMEX. Spot gold has gone above US$1,000 an ounce to US$1,012. Gold was trading around US$950 a month ago. However, price of Crude Palm Oil was almost unchanged since last week. The 3rd month futures contract for crude palm oil is trading at RM2,182 per metric ton in Bursa Malaysia. Price of Rubber futures (RSS3) in TOCOM however, fell from JPY$218 to JPY$206 as the yen strengthen against the US dollar.

Momentum indicators continue to be bullish since the resistance breakout last week. The resistance level for the FBMKLCI was 1,200 points. The RSI, MACD, Momentum and ADX indicator continue to create higher highs in the short term indicating strength in the current rally. The FBMKLCI up trend rally is well supported by the 30-day moving average and the uptrend line since April this year and both these levels are currently at 1,184 points. The longer term 90-day moving average currently stands at 1,120 points. The uptrend is intact as long as it stays above these averages.

The Bollinger Bands are still expanding with the FBMKLCI trading at the top bands for the past two weeks. This indicates that the market was at a bullish more, creating new highs. Despite having higher highs, the short term market volatility has declined. The 3-day Average True Range (ATR) has started to fall after gaining for two consecutive weeks. The ATR reading fell from 11 points to 6.5 points. This shows some resistance in the market, preventing the bulls from charging.

The immediate support level for the FBMKLCI is currently at 1,180 points and the uptrend is expected to continue if the index continues to stay above this support level. The resistance level stays between 1,280 and 1,300 points. The leading Ichimoku Cloud indicator is still increasing and the thickness of the cloud is still firm. The increasing cloud means that the price trend is still intact and the firm width of the cloud suggests that the benchmark index up trend can be supported at least in the next one month.


Daily FBMKLCI chart as at 17 September 2009 using NextVIEW Advisor

There are only three trading days next week as the market is closed for the first two days of the week because of public holidays. Profit taking activities is expected on Friday (this analysis is prepared on Thursday) before the long weekend as short term punters may want to lock in their profits. However, it may not affect the index much because sentiment is still bullish. If there is no selling pressure on Friday, then the market may continue may rise marginally after the holiday if the regional markets turn positive as investors may continue to accumulate.

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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.