FBMKLCI: Weaker Momentum

The Malaysian equity market moved into a minor correction after making a 15-month high in the previous week. The FBMKLCI shed 9.71 points or 0.8% in a week to settle at 1,208.35 points Thursday. The local market was rather defensive and did not rally like the rest of the regional markets. Investors and traders were not so confident about the market making new highs and started to take profits. The FBMCKLI traded in a tight trading range between 1,200 and 1221 points last week with a daily average volume of 662 million shares. The average trading volume was 18% lower than the previous week of 813 million shares. Market players are staying in the sidelines.

The FBMKLCI is still in an uptrend. The benchmark index is still above the short term 30-day moving average. The short to long term 30 to 90-day moving averages are still increasing, indicating that the trend is still intact. There is a divergence between the momentum indicators and the FBMKLCI in the longer term. This means that the uptrend since the low in March this year is weak. However, the readings from these indicators are mixed. RSI and Momentum indicators are indicating that the bulls are still in control with reading slightly above the middle level but MACD and ADX indicators signals weaker momentum.

The Bollinger Bands which was expanding in the past three weeks has started to contract as the index moves away from the top band to the middle band, which is the 20-day moving average. This indicator shows that the upward momentum has started to weaken. Market volatility remains the same as the previous week. The Average True Range (ATR) indicator shows that the FBMKLCI average trading range is 8 points.

The immediate support and resistance levels are at 1,196 points and 1,230 respectively. The FBMKLCI is currently in this range and as long as the FBMKLCI stays within this range, the market is expected to trade without any direction and trading volume would decline further. The leading Ichimoku Cloud indicator has started to tighten last week and this means that support is getting thinner. However, we may not expect a major reversal in the next one month.

The indicators are showing that the market is currently at a standstill and this does not bode well with the uptrend. If the market continues to trade sideways, interests may dwindle and market may start to fall when investors and traders start to distribute. The uptrend can only be continued if the FBMKLCI breaks and stay above the 1,230 points with a target of 1,300 points. However, if the 1,195 points support level is broken, more downside can be expected and the next support level is at 1,160 points.


Daily FBMKLCI chart as at 1 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.