After a volatile first week in May, the benchmark FBM KLCI staged a follow-through technical rebound in tandem with gains in regional markets when the European Union made available an unprecedented loan package of up to 500 billion euros with an additional 250 billion euros from the IMF to salvage the highly indebted PIIGS countries in the Euro Zone.
The benchmark index opened last week slightly lower but quickly shrugged off the weakness and rally to the intra-week high of 1348.09 on last Thursday. However, the key index suffered losses of 7.62 points last Friday to close at 1339.30, dragged down by Sime Darby which reported huge cost overruns of nearly RM1 billion from its energy and utility projects.
Despite the strong 1Q10 GDP growth of 10.1% released on last Thursday evening, which was the fastest growth in a first quarter since year 2000, the market continued to stay in the red last Friday. Bank Negara Malaysia raised its overnight policy rate by 25 basis points to 2.5%, to head off any potential inflationary threat and normalize its monetary policy post credit crisis.
On a week-on-week basis, the benchmark FBM KLCI rose 6.48 points to 1,339.3 from 1,332.82. Weekly turnover increased to 3.842 billion shares worth RM5.712 billion from the previous week's 3.547 billion shares worth RM7.014 billion.
On the weekly chart, the FBM KLCI formed an inverted hammer-like candlestick which indicates some selling pressure when the key index approached the resistance zone of 1350 level. The key index attempted to challenge the recent high of 1349.92 registered on 4th of May recently, but failed to break through it when it only managed to touched the intra-week high of 1348.09. With this, the benchmark FBM KLCI is likely to continue its consolidation in the coming week.
Weekly MACD continued to slide lower with its histogram gaining length in southward direction, indicating the consolidation mode of the key index. Weekly RSI(14) at 67 has hooked up, is still in the bullish zone. Weekly Stochastic at 92, continued to stay in the overbought zone, has tapered off, but is still above its weekly slow Stochastic. Mixed signals from the indicators are pointing towards a consolidation in the immediate term.
The FBM KLCI is currently resting on its 5 and 10-week moving averages (MA). On the daily chart, it is, however, below its 5 and 10-day MA but resting on the 30-day MA which is at 1338, a close below this level will see the key index move lower to re-test the support zone at 1324 to 1330. The medium to longer term trend, as indicated by the 60 and 120-day MA is, nonetheless, still up. As the longer term trend is still remain up, any short term weakness should be viewed as an opportunity to accumulate quality shares at lower prices
For this week, in view of a lack of fresh leads locally and the continued speculation of Sime Darby’s losses, on top of still fragile overseas markets, the FBM KLCI is likely to correct or consolidate. However, corporate results that will be release over the next two weeks may give some guidance to the direction of the benchmark index.
As the Dow fell another 162.79 points or 1.51% to close at 10,620.16 last Friday, the local market is expected to face some volatility today. This week, the FBM KLCI may trade within a range of 1290 to 1361, and for today it is likely to trade within a range of 1324 to 1348.
This week's expected range: 1290 – 1361
Today’s expected range: 1324 – 1348
Resistance: 1342, 1345, 1348
Support: 1324, 1328, 1333
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