Kuala Lumpur Composite Index: Expect a slightly bullish start with improved volume

Last week was slightly bullish with lower trading volume despite being the last week of the year 2009. The FBMKLCI rose for three consecutive days since the previous week but failed to close higher on Thursday. On week-to-week basis, the FBMKLCI still managed to close about 10 points higher from 1260.53 points to 1,271.12 points. The index went as high as 1,275.29 points. Average daily trading volume for last week was 566 million shares, slightly lower than the previous corresponding week. Other markets were directionless except for Singapore, which bucks the trend and continues to make new highs last week.

The lower volume clearly shows that investors were still on a holiday mood. Lack of positive news discouraged investors from trading last week. The talk of the week was in the airlines industry. After Japan Airlines share price fell 24% to a record low because of fear that the company may go bankrupt and the failed attempt to attack a US carrier caused local airlines to decline on Thursday. Malaysian Airlines System shares shed 9 sen to 3% to RM2.91 and Airasia fell 3 sen or 2.2% to RM1.35.

There was no strong positive news on the Malaysian economy except that the Consumer Price Index (CPI) which measures inflation rose 0.3% month-on-month but declined 0.1% year-on-year. Economic indicators were mixed in the US. Consumer confidence index rose to the highest level in three months in December but new home sales in November not only unexpectedly fell but registered the biggest drop since April this year. Jobless claims fell more than expected. Initial unemployment claims for the week ended 19 December stood at 452,000, which is better than estimates at 470,000

The Malaysian Ringgit against the US dollar remains firm at 3.42. The US dollar was strengthening against major currencies for the past few weeks. Prices of commodities were slightly bullish as the US dollar rally halted. Price of COMEX gold futures remains unchanged week-on-week despite a rebound to US$1,100 an ounce earlier but settled at US$1,090 Thursday. Price of crude oil futures in NYMEX increased from around US$76.00 a barrel to US$79.50 in a week. Closer to home, crude palm oil futures in Bursa Malaysia climbed about RM100 per metric ton to RM2,595 week-on-week.

The FBMKLCI managed to close above the short term 30-day moving average. The index has been criss-crossing above and below this average for the past one month. The moving average has been flat and this shows correction in the short term. However, the mid to long term trend is still up as the 60 and 90-day moving averages are still increasing and the index is above these averages levels.

Momentum indicators are showing slight increase in bullish momentum. The RSI and Momentum indicators are making new short term pivot highs and lows and the MACD has recently crossed above its moving average after being below it since late November. There were no changes in market volatility. Average daily trading range remains at 6 points and the Bollinger Bands slightly increased. The market was quiet and directionless for the past one month.

The leading indicator, the Ichimoku Cloud indicator continues to contract and stay between 1,260 and 1,265 points despite the slight bullish effort last week. Based on this indicator, we may not see a reversal until the next one month, that if the Cloud bottom and top lines start to cross.

Market sentiment was weak mainly because there were no strong positive catalyst in the market and the year end holiday season. The good news is that there no presence of selling pressure. I mentioned some time ago that the institutional investors are not able to sell until a significant volume is created by retail investors and most of them brought their open positions forward to the new year. Technical indicators seem to be showing good up trend support, but a reversal is expected some time next month.

With this, I’d expect the market to be slightly bullish in the first week of the new year and with improved volume. The market seems like trying to welcome retail investors who have been very cautious in year 2009. The FBMKLCI may test 1,300 points again but may find difficulty in staying above it. Immediate support level is at 1,230 points. Therefore, be smart in investing and trading in the new year and being smart means having the right knowledge and a trading plan.

****

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.

Kuala Lumpur Composite Index (FBMKLCI): Stronger resistance

The market was awakened by the news from Dubai Monday after a holiday last Friday for the Aidil Adha celebration. The market took a small plunge on Monday after Dubai World, an investment company which manages and supervises a portfolio of businesses and projects for the Dubai government across a wide range of industry segments, seek delay in debt payments. This caused fear across markets and investors were seen selling finance and construction stocks relating to Dubai as they were afraid that this may fuel another financial crisis.

On Monday, the benchmark FBMKLCI opened 13.73 points lower at 1,256.88 points. Market was volatile and uncertain that day with the FBMKLCI trading in a range between 1,248.58 and 1,268.98 points before settling slightly higher than the open at 1,259.11 points. The market rebounded in the next three days and closed at 1,272.35 points Thursday, covering Monday’s losses and back to the same level as the previous week. Volume on Monday was relatively higher than the average at 1,100 million shares but the daily average for last week was 906 million shares, just slightly lower than the previous week.

Technical indicators readings were almost the same as last week despite a bearish start on Monday. The FBMKLCI went below the 30-day moving average, which has been supporting the index since April, on Monday but managed to climb and stay above it when the market rebounded. The 30-day moving average is currently at 1,265 points while the longer term 90-day moving average is at 1,221 points. They were no changes in the characteristics of the moving averages.

However, momentum indicators seem to be a little bearish. The Relative Strength Index (RSI) decline below 50 on Monday but managed to rebound slight above it. The MACD indicator continues to slide and the Momentum indicator is currently below the mid-level. All these indicators are suggesting a weakening momentum in the uptrend and this means that resistance is getting stronger.

As the FBMKLCI continue to trade sideways around the 20-day moving average, the Bollinger Bands continues to tighten further. The volatility is getting lower as the market is not moving into any clear direction. The daily average trading range is pegged at 6.6 points, based on the Average True Range indicator. The Ichimoku Cloud indicator continues to stay sideways but slightly thinner. This means that the support for the current up trend is getting weaker.


Daily KLCI chart as at 3 December 2009 using NextVIEW Advisor

The index has already tested the 1,260 points support level because of the Dubai news but went back above it again. With the stronger resistance and lack of catalysts, the FBMKLCI may test the 1,260 points support level again this week and possibly move into the next support level at 1,230 points if the first support level is broken. Be prepared to also face another week of low volatility and liquidity. The crucial support level, which determines the current up trend is maintained at 1,200 points. Resistance level remains between 1,290 and 1,300 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.

US Dow Jones Industrial Average (DJI) – Momentum indicators are neutral

Investors in the US were startled by Dubai’s debt problems on their national holiday celebrating thanks-giving Thursday. The panic caused investors to sell on Friday and this caused the DJI to fall 154.48 points or 1.48% to close at 10,309.92 points. The DJI went as low as 10,231 points intraday before rebounding to close higher. On the last day of November, the DJI slightly rebounded to close at 10,344.84 points. The selling pressure was not as bad as expected despite heavy losses in the Asian and European markets when US was on holiday. The selling pressure was buffered by improve consumer spending, improved jobless claims and home sales.


Daily DJI chart as at 30 November 2009 using NextVIEW Advisor

Trading volume was unexpectedly low as investors were not rushing to sell, but prefer to hold on and wait for further developments. The DJI is currently still in an uptrend supported strongly by 60-day moving average. The 60-day moving average is currently at 9,900 points and the DJI is expected to pullback to this immediate support level. Momentum indicators have gone into the neutral zone, but in the long term, the uptrend is still strong because these indicators in convergence with the uptrend. If the immediate support level is broken, the DJI may fall further into correction and find support at 9,700 points. However, if the immediate resistance level at 10,500 points is broken, the market may rally strongly to the next resistance level at 10,700 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.

Hong Kong Hang Seng Index (HSI) – Stronger bearish pressure

As one of the major financial hubs in Asia, the Hong Kong equity market took a plunge after Dubai announced having problems in paying its debts which caused investors to worry about another financial crisis. The HSI gapped down and fell slightly more than 1,000 points or 4.8% on the 27th November to close at 21,134.50 points. However, the market rebounded at the end of the month to close at 21,821.50 points. In the middle of November, the HSI peaked at 23,100 points, the highest since August last year. Trading volume, which continues to slightly decline in the past few months have been quite high in the last few days in the month of November.


Weekly HSI chart as at 30 November 2009 using NextVIEW Advisor

The HSI rebounded exactly on the 90-day moving average. Since April this year, the HSI was supported by the 60-day moving average but the plunge on Thursday broke this support level. However, the benchmark index is back above the 60-day moving average. The upward momentum for the past three months has been weak. The momentum indicators continue to diverge from the uptrend since September and indicate stronger bearish pressure. This shows strong resistance and there is a little chance for the HSI to move higher above the recent peak at 23,100 points. The HSI may test the 90-day moving average support level again at 21,250 points and if this is broken, the market may continue to move further downwards to the next support level at 20,400 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.

Benny Lee on BFM 89.9

Shares on Bursa Malaysia rose today, with the FBM KLCI gaining 0.6% to 1,266 points on a technical rebound, according to Benny Lee, Chief Market Strategist of NextVIEW. He believes that in the short term, upside potential for the market is very limited and looking at the FBM KLCI there is a strong resistance at 1,290-1,300 points. He advises investors should stay away from the market until the market corrects further.

FTSE Straits Times Index (FTSTI) – Head towards immediate support level

In Mid-November, the FTSTI managed to test the 2,700 points immediate resistance level and rallied to the next resistance level at 2,800 points, climbing to as high as 2803.83 points. However, the market fell steeply in the last two trading days of the month by falling about 70 points or 2.5% to close at 2732.12 points. On a month-to-month basis, the benchmark index was still able to close positively by an increase of 81 points or 3%. Trading volume has slightly declined in the past few months. Investors’ confidence in the market has been weak.


Weekly FTSTI chart as at 30 November 2009 using NextVIEW Advisor

The FTSTI is still in an uptrend and since April this year when the uptrend started, it has been supported by the 60-day moving average. The moving average is currently at 2,685 points and this should be the immediate support level. The pattern from the chart shows that the market has strong support at 2,600 points. The FTSTI is expected to head towards the immediate support level before continuing the trend. There is still a chance for the benchmark index to climb to the uptrend technical target at 3,000 points but this is unlikely going to happen in the next 4 to six months. Immediate resistance level is 2,800 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.

Malaysia FBKLCI: Sideways with downward bias

Last week’s market performance was almost a non-event as the market was relatively quieter and lower in volatility. After two consecutive weeks of making new highs for the year, the benchmark FBMKLCI failed to make a new high last week. The index closed at 1,271 points Wednesday, 4 points lower than previous Wednesday’s close. Average daily trading range was only 5.6 points against 7.5 points in the previous week. The average daily trading volume in the past one week was 915 million shares against 1170 million shares in the previous corresponding week.

After rebounding from a downtrend, the US dollar continues to weaken again against the Malaysian Ringgit and other major currencies. The Malaysian Ringgit strengthened from 3.39 to 3.36 against the US Dollar in a week. The weakening US dollar pushes prices of commodities higher. Leading the pack is gold and there seems to be a buying frenzy in this precious metal. Price of gold creates new historical high and at US$1,170 an ounce, it could easily hit US$1,200 soon. Price of crude palm oil in the futures went as high as RM2,518 before settling at RM2,482 per metric ton. Just about a month ago, the price of crude palm oil was trading at around RM2,200. However, price of crude oil continues to trade below US$80 a barrel. There is already a concern about commodities price bubble, especially gold.

Last week, I wrote that the market may move into a correction any time soon. The correction last week was not the one that I am expecting. I am expecting a bigger one. Therefore, the correction may have just started, unless the FBMKLCI breaks above 1,280 points. The short term 30-day moving average is at 1,262 points, just 10 points below the index. The 30-day moving average has been providing good support for the FKLI for the past 6 months and therefore a break below this moving average may signal major correction in the uptrend.

Momentum indicators continue to decline. The Momentum and MACD indicators get nearer to the mid-level while the RSI indicator maintains the same level as the previous week. In the longer term, the divergence between the FBMKLCI and the momentum indicators suggests a strong resistance at the nearest high, which is 1,288 points. However, the Bollinger Bands width remained wide and firm as the index stays above the middle band, which is a 20-day moving average. This shows that despite the weaker sentiment, the market is still being supported well.

The Ichimoku Cloud indicator width maintains the same but has slightly increased in value. The cloud, which is plotted 26 trading days ahead, is currently between 1245 and 1,270 points. So, the FBMKLCI level is just above the cloud. The index is therefore expected to move sideways this week with a downward bias because of the weak momentum. If the FBMKLCI is unable to continue its trend in a month, then we may see further correction downwards.


Daily FBMKLCI chart as at 25 November 2009 using NextVIEW Advisor

The immediate support level is at 1,260 points (the 30-day moving average) and if the index falls below this level, the market is expected to move further into correction and test the next support level at 1,200 points. Technically, 1,200 points is a crucial support level and the uptrend can only be sustained if the FBMKLCI stays above this level. A major correction may take place if this crucial support level is broken. The resistance level remains at 1,300 points and like I have mentioned in my earlier commentaries, I am not expecting it to be broken this year.

****

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.

Benny Lee on BFM 89.9

Benny shares his views on Bursa Malaysia FBMKLCI and CPO Futures, US dollars and Airasia.

KL Composite Index (FBMKLCI): Expected to move into a correction anytime soon

The market continues to make new highs last week but was not able to sustain and immediately pulled back. Resistance is getting stronger, as mentioned last week. The FBMKLCI went as high as 1,288.42 points, highest since May last year before pulling back to close at 1,276.65 points Thursday. The benchmark index still managed to close higher but only 4.9 points from the previous week. Last week, there was selling pressure whenever the market tries to push prices higher. Traders’ sentiment was a little weak as the price in the KLCI futures market closed at a 5 points discount from the underlying FBMKLCI.

The US Dollar rebounded last week against major currencies after starting on a weak note earlier this week but is still lower week-to-week. The US Dollar index (futures) in ICE NYBOT is currently at 75.545, 0.625 or 0.8% from last Monday’s close at 74.920. The Malaysian Ringgit is RM3.39 against the US Dollar, weakened by RM0.01 from last week. Price of commodities increased week-to-week despite a rebound in the US Dollar.

The price of gold continues to make new historical highs and closed 2.2% higher at US$1143.60 an ounce from the previous week. Price of crude oil futures in NYMEX however continues to trade around US$80 a barrel. Price of crude palm finally increased after moving sideways for weeks. The price rose 5.6% higher to close at RM2,371 per metric ton. TOCOM rubber futures (RSS3) also continues its upward rally by climbing 4% to close at JPY$243.50 per kg in a week. Price of rubber has risen 7.7% month-to-date.

The movement on the FBMKLCI can be considered uncertain this week as it close almost at the same level as last week, despite making new highs. Trading volume last week was almost the same as the previous corresponding week. 1.17 billion shares exchanged hands daily on average. The trading volume on Thursday was 1.385 billion shares and Maxis shares, which was re-listed account for about 22% of Thursday’s trading volume. The FBMKLCI up trend is still being supported by increasing moving averages. The nearest short term 30-day moving average is currently at 1,258 points. All short to long term 30 to 90 day moving averages are increasing.

Despite making new highs for the past two weeks, the momentum indicators like RSI and Momentum are still lower than their previous pivot high. The divergence still exists between the momentum indicators and the FBMKLCI uptrend. This simply means that the bullish rally in the past two weeks may not be strong enough to overcome the increasing resistance standing front of the bulls. The MACD indicator may have crossed above its moving average but the cross happened with a lower MACD level.

The volatility of the FBMKLCI is a little weaker last week than the previous week. The FBMKLCI traded in a 7.6 points daily trading range, calculated from the Average True Range (ATR) indicator. The previous week’s ATR was 8.5 points. This simply means that the market does not have confidence in a direction as sentiments were mixed. However, The Bollinger Bands is still expanding as the FBMKLCI managed to stay above the middle band.

The leading Ichimoku Cloud indicator has increased a little but the width of the cloud remains the same. The support from this indicator is between 1,240 and 1265 points. There is still no sign of any trend reversal in the next one month, based on this indicator reading. The possibility of the FBMKLCI to climb to 1,300 points is getting thinner. I have mentioned before that the index may test this level but may not be able to break above it this year.


Daily FBMKLCI chart as at 19 November 2009 using NextVIEW Advisor

With the current level and momentum, the FKLI is expected to move into a correction anytime soon, especially if the 1,258 points immediate support level breaks. The next technical support level will be at 1,200 points. The uptrend is expected to continue with a lower momentum if it can stay above the immediate support level.

****

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.

Bursa Malaysia FBMKLCI: Resistance getting stronger

The FBMKLCI managed to inch up higher last week but still short of the 1,300 points expected target. Last week, the benchmark index went as high as 1,279.52 points and closed at 1271.75 points Thursday. One a week-to-week basis, the index rose 17.79 points or 1.4%, slightly higher than the increase in the previous week. On Thursday, there is evidence of support when the market rebounded in the last two hours of trade to cover its strong losses in the morning. The FBMKLCI went to a low of 1,262.48 points before it rebounded 9 points.

The FBMKLCI continued its uptrend journey by breaking above the 1,272 points immediate resistance level from the Bollinger Bands indicator last week. A new pivot high is created and this simply means that the uptrend is still developing. The index is well above the short to long term 30 to 90 day moving averages. The upward rally last week was supported by a relatively lower volume of 1.16 billion shares on a daily average. The average for the previous corresponding week was 1.3 billion.

There is a strong divergence between the current uptrend on the FBMKLCI and the momentum indicators. While the FBMKLCI is making new highs, the RSI, MACD and Momentum indicators are not. These indicators are indicating that the uptrend has weakened as the resistance gets stronger. At current level, the market provides a good opportunity for profit taking for those who have got into the market earlier.

The FBMKLCI has been trading around an 8.5 points range a day, as indicated by the 5-period Average True Range (ATR) indicator. The market volatility is almost the same as the previous week. When the index moved towards the top band of the Bollinger Bands as I have mentioned in my first paragraph, the bands starts to expand slightly. For the many times the FBMKLCI broke the top band in the past few months, the market rallied, provided that the FBMKLCI keeps testing the top band. Therefore, next week will be a crucial test that if the index is not move along to top band, the resistance is clearly strong.


Daily FBMKLCI chart as at 12 November 2009 using NextVIEW Advisor

There is still a possibility for the FBMKLCI to climb to 1,300 points, provided that it stays above the immediate support level of 1,230 points. However, it may not happen this year as it needs a proper correction to remove the resistance ahead. The leading Ichimoku Cloud indicator starts to expand but at between 1,220 to 1,260 points, still below 1,300 points. Therefore, the FBMKLCI is expected to just trade slightly above this range in the next one month. If the 1,230 points support level is broken, the FBMKLCI may find support at 1,200 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.

Benny Lee on BFM 89.9

Vietnam VNI Index Analysis and Forecast

After a strong performance in the past few months, the Vietnam equity market went into a correction in the last week of October. Despite the bullish trend, the momentum was weak, as indicated by the momentum indicators last month. The benchmark VN Index in Ho Chi Minh found resistance at 633.21 points on the 23rd of October and pulled back to close at 587.12 points. On month-to-month, the VN Index only climbed 6.22 points, the lowest monthly increase in 8 months. The index has just broken below the 30-day short term average support level. The crucial support level to maintain the uptrend as mentioned last month is 520 points.

Click HERE to continue reading this analysis and forecast by Benny Lee.

Thailand: SETI Bullish momentum is still strong

The Thai equity market was generally bullish in the beginning of October and the (Stock Exchange of Thailand Index (SETI) made a new 13-month high at 758.55 points. The market turned into a very volatile mode starting middle of last month when investors have generally lost confidence as the country’s positive sentiment was setback again by political protests. The recent speculation that HM the King was dying sparked panic in the market and the SETI plunged 10% from 746 points to a low of 671 points in two days. It rebounded immediately to 738 points in three days but was dragged down again to close at 685.24 points.

The short term trend has started to decline but the long term trend is still up with a support level at 665 points, based on a 90-day moving average. The index is currently at a 60-day average. Momentum indicators like RSI, MACD and ADX have started to indicate bearish strength. The index failed to stay above the 700 points support level and therefore it is expected to test the next support level at 650 points, as mentioned last month. The index is expected to rebound at 650 points and the resistance level is now the previous support level, which is 700 points.


Weekly SETI chart as at 30 October 2009 using NextVIEW Advisor

****

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.

FBMKLCI possibly heading for 1,300

The equity market rebounded technically on the 30-day moving average after correcting from a high of 1270.44 points about three weeks ago to a low of 1233.45 points last week Monday. The low was exactly on the short term 30-day moving average and the FBMKLCI is currently at 1,253.96 points. The market was bullish the whole of last week with fresh news from the US economic data which shows further improvement on the US economy. The FBMCKLI increased 1% from last week and is supported by a relatively good market participation.

In America, new unemployment claims fell more than expected while the Senate approved to extend unemployment benefits by up to 20 weeks and extend homebuyer tax credit. Malaysia economy however is mixed. The World Bank appears to be more confident that Malaysia’s officials as it forecasts Malaysia economy to grow by 4.1% next year after contracting by an estimated 2.3% this year. The government’s estimation was between 2% and 3%, announced in the recent National Budget.

However, Malaysia’s exports and imports dropped on a month-on-month basis for the second consecutive month in September which led to year-on-year decline to start to expand. Malaysia’s Producer Price Index (PPI) in September declined by 9.6% from the same month last year (year-on-year). For the first nine months of this year, PPI also declined by 9.6% from the same period last year.

The US dollar pulled back after a strong rally and commodities prices start soaring again. The US dollar weakens against the Euro dollar, Japanese Yen and most other currencies. This, coupled with improving US economy encouraged price of commodities to move higher. Price of gold hits new high when it went to almost US$1,100 an ounce in COMEX and is currently at US$1091.50. Price of oil which went below US$80 in the last two weeks is slightly above US$80 again. Price of rubber in TOCOM remains the same as last week at JPY$230 while the price of crude palm oil in Bursa Malaysia broker the high of last week and is currently RM2,247 per metric ton, RM50 higher than the previous week.

The uptrend of the FBMKLCI is still well intact after being supported once again by the short term 30-day moving average. The rally last week was supported by an average daily trading volume of 1.3 million shares, an increase of 30% from the previous week’s average. The RSI and Momentum indicators which measure bulls and bears strength were at the mid level in the previous week and begin to slightly increase. The bulls are trying to push forward against the bears. However, the MACD indicator has yet to come above its average and the ADX indicator is still declining.

Despite the bullish move last week, market volatility has slightly dropped. The daily ATR indicator which measures average daily volatility fell from 10 points in the previous week to 8.3 points last week. This simply shows a steady recovery after strong downward correction in the previous week. For the past one month, the average daily volatility has been quite steady at about 10 points a day movement on the FBMKLCI. As the benchmark index trading around the short term moving average, the Bollinger Bands has started to contract since last week. The Bollinger Bands suggests that the market is in a correction and will only start to move if it breaks the top band, currently at 1,272 points or below the bottom band at 1,232 points.

The leading Ichimoku indicator continues to remain firm sideways. There is no indication that the market up trend is going to reverse in the next one month, but the FBMKLCI is starting to move towards the support area or the cloud of this indicator. The uptrend is expected to reverse when the FBMKLCI moves below this support area. The market has just rebounded and the rally is not over. The resistance level which I have been mentioning since last month is between 1,280 and 1,300 points.

There is a possibility of the FBMKLCI moving to 1,300 points especially if it breaks the Bollinger Bands resistance at 1,272 points. If the index not able to break above this immediate resistance, then further sideways move is expected. The index is expected to be supported at 1,230 points. Therefore, there is still short term buying opportunities for traders this week but do not buy if the market goes near 1,300 points.


Daily FBMKLCI chart as at 5 November 2009 using NextVIEW Advisor

****

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.

FBMKLCI may move higher this week

The market went into a profit taking mode after the tabling of the National Budget in the previous Friday which most investors see as moderate and balanced for the economy but little for the equity market. The equity market pulled back last week after the benchmark FBMKLCI failed to extend gains after three consecutive weeks of increase with a lower trading volume of 945 million shares averagely on a daily basis. The FBMKLCI closed at 1,241.75 points after rebounding from the intraday low of 1,236.20 points on Thursday. The FBMKLCI fell 18.27 points or 1.4% from last week. The decline was also in line with the correction in global markets.

The Malaysia 2010 Budget has 3 focuses: (i) driving Malaysia towards a high-income economy, (ii) ensuring a holistic and sustainable development and (III) focusing on the well being of the Rakyat. Malaysia economy is forecast to grow by 2%-3% in 2010 and estimated to contract by 3% this year. This was announced in the 2010 Budget tabled by Prime Minister that revealed a 5.6% deficit budget. The Government plans to overhaul its tax revenue and subsidies following the weaker economy and lower income from petroleum. Many believed that it is the final stage of completing the study on the implementation of the goods and services tax (GST).

The US market rebounded sharply Thursday after a better-than-expected third quarter GDP reading. GDP increased sharply to an annualized growth rate of 3.5%. GDP was expected to increase 3.2% after contracting 0.7% in the second quarter. The data shows that the US economy is recovering well and boosted investors confidence. The US dollar has rebounded sharply in the past two weeks against major world currencies. The green back has also risen against the Malaysian ringgit from RM3.33 to a US dollar in early October to RM3.40 to a US dollar.

The upward rally of commodities prices started to halt as the US dollar strengthens. Price of gold found resistance after trading at about US$1,065 an ounce in the futures market in COMEX. It is currently trading at US$1047. Price of oil has also been struggling to increase after hitting a high of US$82 a barrel and is now trading slightly below US$80 in NYMEX. Price of rubber in TOCOM still trades above JPY230 a kg after rallying from JPY200 last month. In Bursa Malaysia, crude palm oil futures pulled back to RM2,195 after climbing to a high of RM2,250 in the previous week.

The FBMKLCI pulled back to the 30-day moving average which has so far provided quite good support to the current up trend. The rebound from Thursday shows that the benchmark index is still being supported at this average. The RSI and Price Momentum trend strength indicators are at the equilibrium and this indicates the pull back is not pressured by selling forces yet. However, the MACD has just crossed below its moving average but at a higher level. The current uptrend is expected to stay intact until these momentum indicators start to decline further.

Daily volatility in the market has slightly increased in the pull back with the Average True Range (ATR) reading increased from 8.5 points to 10 points. Therefore, the pullback is not a strong selling pressure as the average daily volatility should increase 2-fold to indicate strong movement. The FBMKLCI moved towards the middle band (20-day moving average) of the Bollinger Bands, causing the top and bottom bands to contract. This indicates a correction in the FBMKLCI.


Daily FBMKLCI chart as at 29 October 2009 using NextVIEW Advisor

The decline last week has not confirmed a trend reversal as the indicators are still supporting the uptrend. The bullish reversal pattern on Thursday FBMKLCI chart indicates that the market may rebound from the current low. Therefore the benchmark index may move higher this week and has a high chance of testing the high of 1,270 points this week or next week. Failing to test this high means that the market resistance is strong and further downward correction may happen especially if it breaks the immediate support level. Immediate support level is at 1,236 points while a stronger support level at 1,200 points. Major resistance level remains between 1,280 and 1,300 points. Therefore, potential upside is less and traders should strategize themselves to take fast and small profits should they trade in the equity market this week.

****

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.

Malaysian equity market still bullish but may struggle to move higher this week

After making a new high since June last year at 1,270.44 points, the FBMKLCI pulled back to close at 1260.02 points on Thursday with a relatively lower volume. The benchmark index still managed to close positively from last week with a modest gain of 13.16 points or 1%. There were profit taking activities in the past two days but the pressure was not high to cause the market to decline substantially. The KLCI traded between 1,247.18 and 1270.44 points in the past five days. There were not much news or financial data released last week and all eyes and ears are focused towards the national budget on Friday.

The average daily trading volume was 1130 million shares but volume declined sharply in the past two days with a daily average of 887 million shares. Investors were staying out to wait and see the outcome of the national budget which is expected to be broad-based. Prices of commodities keep soaring as the US dollar plunges further. This worries investors because high commodities prices may dampen economic growth. Regional market performances are mixed and are starting to feel stronger resistance.

The US Dollar is still weakening against major currencies. The Euro dollar is now EUR$1.50 to a US dollar. It has increased 3.4% in less than a month. However, it has strengthened against the Malaysian Ringgit last week. The weak US dollar has pressured commodities prices to climb higher. Gold continues to stay at US$1,060 an ounce while crude oil has gone above US$80 a barrel. Prices of rubber futures in TOCOM and crude palm oil futures in Bursa Malaysia have also risen to JPY225.00 a kg and RM2,210 per metric ton respectively.

The market continues to stay in an uptrend. The FBMKLCI is still being supported strongly by the short and long term uptrend. The rally in October is stronger than the rally in August. The momentum indicators are showing stronger bullish momentum in this rally. The RSI and Momentum indicators pivot highs are higher than the previous pivot highs. The MACD indicator continues to stay above its moving average. There is still little room for the market to move higher because the resistance level is at the range between 1,280 and 1,300 points.

The market volatility remains the same as last week with the Average True Range (ATR) indicator indicating an 8.5 points daily range. The index is still hovering at the top band of the expanding Bollinger Bands which also measures volatility in the intermediate term. This also means that the distribution of price in the past one week is on the high side. This confirms the momentum indicators which indicated strong bullish strength.


Daily FBMKLCI chart as at 22 October 2009 using NextVIEW Advisor

The market has almost fully recovered from the 2008 bear trend and there is still no major correction since the rebound in March this year. It took nearly more than three years (2004 – 2007) for the FBMKLCI to climb from 800 points to 1,260 points and less than a year for it climb the same this year. We have been waiting for at least a major correction to happen but the market is just bulldozing through resistance levels. Analysts, fundamentalists and chartists alike, including yours truly have been revising the resistance levels higher a few times this year. Can the resistance be broken again this time?

Chances of the index testing this level are high but there is low chance that it will stay above it and rally further without a proper correction. The resistance level I talked about since last month is 1,280 to 1,300 points. The market is not expected to immediately turn bearish either, because the leading indicator, the Ichimoku Cloud is still widening and market is supported well. The market may struggle to move higher this week. The immediate support level is 1,220 and if this level is broken, then the market may move lower for correction with the next support level at 1,160 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.

INDEX BRIEFS – NIKKEI, JAPAN by DARYL GUPPY

The Nikkei has two important features. They are best seen on the weekly chart. The first is the series of trading bands. These provide support and resistance levels. This pattern of behavior is similar to the patterns seen with many other regional indexes, but the Nikkei is less developed. The upper edge of the current trading band is near 10400. The market consolidated in this area and is now retreating from this resistance level. The lower edge of this trading band is near 9000 and this is the new downside target. Traders will look for support consolidation in this area.

The second feature is the uptrend line starting from the March low. The position of this line was confirmed when the market developed a successful breakout above the long term downtrend line. The drop below the new uptrend line is bearish. This uptrend line intersects the trading resistance band level. The failure of the market to push above this level and to remain above the uptrend support line sends a stronger bearish message. There is a low probability of a rally rebound developing prior to a retest of support near 9000. There is also a low probability the market will easily move above the resistance level near 10400.



The trading band extended from near 7500 to 9000. The trading band is used as a projection method and sets an upside target near 10400. This is a nominal target because it does not coincide with any previous support or resistance level. However it has proved to be a more significant resistance level than the historical 10,000 resistance level.

Regional markets have moved in double trade band projections. Using this method the next resistance level is near 11800. This is near to the strong historical support resistance level at 12,000. The rapid market fall from near 12,000 suggests there is little resistance to a rapid rise in the market. Once the market is above to move above 10400 here is a high probability the market will move quickly and smoothly to 11800 to 12000.

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

***

Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

Malaysia FBMKLCI: Market is supported well

The Malaysian equity market extended its rally last week with the benchmark FBMKLCI climbing 16.77 points or 1.36% from last week to settle at 1,246.86 points Thursday. The index has increased 3.26% in a month. The market found resistance on Thursday when the FBMKLCI fell 10 points from the intraday high of 1,256.59 to close at the current level. Market is supported well by FBMCKLI component stocks ahead of the tabling of the national budget end of this week, improving economic indicators and also strengthening of the Malaysian Ringgit.

Market participation has increased significantly last week especially in the last few days of the week. Average daily trading volume has increased 1,063 million shares from 750 million shares the previous week. The surge in market participation was due to positive economic reports and rise in regional markets. The Dow Jones Industrial Average has increased 2.8% in a week. Japan Nikkei 225 index and London’s FTSE increased 4.1% and 1.3% respectively.

Malaysia Institute of Economic Research (MIER) has upgraded forecast on Malaysia economic performance for this and next year following improving macroeconomic indicators, better consumer sentiment (CSI) and business confidence (BCI) indices as well as improving sectoral indices. Malaysia GDP (gross domestic product) for this year is revised to a contraction of 3.3% from a contraction of 4.2% earlier. While for 2010, Malaysia GDP is expected to grow by 3.7%, higher than the 2.8% forecast earlier. Furthermore, the International Monetary Fund (IMF) earlier this month anticipated the global economy to expand by 3.1% in 2010 from a 1.1% contraction in 2009

The US Dollar is still weakening against major currencies and caused US-dollar dominated commodities to continue to increase. Crude oil in the futures market has surged to US$78 a barrel from US$70 a week ago. Price of gold went as high as US$1,070 an ounce before settling at US$1,050. Japanese Yen-dominated rubber prices in TOCOM remained the same as the following week at JPY$215 a kg. Locally, the price of crude palm oil also increased from RM2,030 per metric ton to RM2,110 although the Malaysian ringgit is strengthening. This is because demand for palm oil in Europe, China and India remains strong. The price of this commodity went as high as RM2,196 last week.

The equity market continued to be supported even in the short term. The FBMKLCI continues to stay above the short to long term 30 to 90 day moving averages. The market was last supported by the short term 30-day moving average about a month ago. The uptrend is supported by a good bullish momentum. The RSI, Momentum and MACD indicators are still increasing since the rally a month ago. In the longer term, these indicators are also indicating a good bullish momentum as these indicators are making new pivot highs. Therefore, there is a high chance that this upward rally is going to continue.

Market volatility remained firm with the FBMKLI traded in an 8.4 points range on a daily basis, based on the Average True Range (ATR) indicator. The volatility was almost the same as the previous week’s daily average range. The distribution of price however is on the upside as FBMKLCI continues to stay at the top band of the expanding Bollinger Bands. This confirms the bullish momentum. The mid band of the Bollinger bands, acts as the average or equilibrium between the bulls and the bears is currently at 1,222 points.

The market made new highs as expected and the immediate support level is revised to 1,200 points when the 1,230 immediate resistance level is broken. The immediate resistance level is now at 1,260 points and a stronger resistance level is between 1,280 and 1,300 points. With the current momentum, there is a high chance FBMCKLI climbing to this stronger resistance range. However, if the market fails to make new highs and the FBMKLI falls below the 1,200 points support level, then the market may move further into correction to the next support level at 1,150 points.

The leading Ichimoku Cloud indicator started to expand a little bit after contracting for about two weeks. This shows that the market still has good support and can be supported well in the near future with the current momentum. Therefore, the equity market may continue to move upwards at least in the next one month or being maintained above the short term support level.


Daily FBMKLCI chart as at 15 October 2009 using NextVIEW Advisor

****

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.

Bursa Malaysia KL Composite Index (FBMKLCI): Set to test newer highs

Markets all over the world rebounded last week after moving into a correction for the past two weeks. The Malaysian market, benchmarked by the FBMKLCI rebounded exactly after testing the Bollinger Bands’ middle band which is a 20-day moving average. The FBMKLCI increased 21.74 points or 1.8% from last week to settle at 1,230.09 points Thursday. Thursday marks the biggest increase in a day for last week’s trading period with a 1% increase. The market is currently testing the immediate resistance level and market participants are optimistic about the equity market outlook.

However, trading volume only increased slightly. The average daily trading volume last week was 750 million shares and the previous week’s average was 662 million. Therefore, not many investors are optimistic and the majority is still staying in the sidelines. The market was spooked by a trading error from a foreign broker on KL Kepong shares which may cost the broker half a million ringgit losses. The market was bullish despite lacking positive leads locally so I guess that no news is good news.

The US Dollar continues to slide against major currencies last week, continuing its down trend. This again has pressured prices of commodities to increase. Price of Gold in COMEX continues to make historical highs and is currently at US$1,050 an ounce, increasing 5% in a week. Crude Oil in NYMEX continues to stay around US$70 a barrel. Rubber futures in TOCOM rose about 6% in a week to JPY$214.80 a kg. However, Crude Palm Oil futures in Bursa Malaysia declined from RM2,115 per metric ton in the previous week to RM2,030.

The benchmark index is well supported by the short term trend. The FBMKLCI continues to stay above the short to long term 30 to 90-day moving averages despite several pullbacks from the uptrend that started in April. A major correction is yet to be seen in this 6 months bullish trend. Momentum indicators are about to turn bullish again after mixed signals last week. The RSI and Momentum indicators are starting to move away from the middle level and the MACD indicator is about to cross above its trigger line or 9-day moving average. ADX indicator has just started to increase again, showing good strength in momentum last week.

The Bollinger Bands started to expand again with the FBMKLCI penetrating the top bands after testing the middle band two weeks ago. The same situation (the expansion) happened exactly a month ago and the FBMKLCI made new highs for the year. Therefore, we may expect the same to happen again and this time the projection is 1,280 points before it finds the next resistance. The average daily trading range is the same as the previous week. The Average True Range indicator which measures the average trading range for past one week is 8 points and is relatively low historically.

The immediate support and resistance are still 1,196 points and 1,230 points respectively. The FBMKLCI is currently testing the resistance level for the second time in a month. The market is set to test newer highs because of the strong bullish reversal and breakout. The next resistance level is between 1,280 and 1,300 points. However, if the market fails to make new highs and the FBMKLI falls below the 1,196 points support level, then the next support level it is going to test is at 1,150 points.

Looking ahead, the leading Ichimoku Cloud indicator continues to contract last week and this indicates that the support for the uptrend is getting thinner. Being a leading technical indicator, a major trend reversal is not expected until the cloud bands cross. Therefore, there is still a chance for the market maintain its uptrend at least for another month.


Daily FBMKLCI chart as at 8 October 2009 using NextVIEW Advisor

****

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.

INDEX BRIEFS – TAIEX, TAIWAN by DARYL GUPPY

Eight weeks ago we said the key figure for the Taiwan index is 7400. This is the long term historical support level and it will act as a resistance level. The market did move above this level but it is now developing a consolidation pattern. The lower long term resistance near 6700 has been overcome and this area will provide support if the market retreats strongly from the lower edge of the consolidation area near 7300. The upside target for a sustained breakout above 7400 is near 8100.



On the daily chart the long term GMMA is well separated and shows good investor support for the developing trend. It has shown relatively little compression as the index retreat developed in early July and again in early August. There is some strong trading activity but it uses the long term GMMA as a support level.

The strength of the trend is shown by the good separation in the long term GMMA. Trend strength has been confirmed as the upper edge of the long term GMMA moves above 7300. A lower edge move above 7100 is confirmation of trend stability and sustainability.

The rapid rise of the trend has stabilised and traders can look for regular rally and retreat behaviour within the context of the longer term uptrend. This is a strong market, but a rapid retreat to support near 7100 is possible.

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

***

Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.