Stocks on Bursa Malaysia closed sharply lower last Friday as investors fled stocks for safe haven assets, unnerved by the hefty fall on Wall Street overnight, fresh jitters about Europe's debt crisis and the increasingly gloomy global economic outlook. Across the region, all markets moved in tandem to record massive losses. The benchmark FBM KLCI plunged 22.46 points or 1.45% to 1,524.43, and week-on-week, it lost 24.38 points from previous week’s close of 1548.81. Losers overwhelmed gainers by 934 to 60 while 152 counters were unchanged. Turnover, however, increased to 1.78 billion shares worth RM3.67 billion from 1.16 billion shares worth RM1.55 billion on Thursday. Total weekly volume increased to 6.020 billion shares worth RM9.858 billion from 5.13 billion shares worth RM8.07 billion the previous week.
The FBM KLCI opened last week steadier on news that US congressional leaders have agreed to raise the debt limit and cut government spending to avoid a potentially disastrous default, and the key index closed Monday 9.20 points higher at 1,558.01 after hitting intra-week high of 1,558.49. The FBM KLCI closed 3.16 points lower at 1,554.85 on Tuesday in line with continued weaknesses in regional markets which were spooked by concerns of a slowdown in global manufacturing activities. On Wednesday, the FBM KLCI lost 9.75 points to 1,545.10 in line with weaker regional bourses as US stocks plunged overnight on poor economic data. The benchmark FBM KLCI rebounded to close 1.79 points higher at 1,546.89 on Thursday, but on Friday it plunged to the intra-week low of 1,509.37 before rebounding to close the week at 1,524.43.
On the weekly chart, the FBM KLCI fell for the fourth consecutive week, and formed a bearish black candlestick. It rebounded when it hit the 50-week moving average (MA) support, and the last time it hit the same 50-week MA and rebounded was on May 27 2010. The FBM KLCI is at a critical position now, as it has broken the 30-week MA and is just slightly above the 50-week MA. In order to maintain the weekly uptrend, the key index will have to close back above the 30-week MA which is currently at 1,539-point level. If the key index close below the 50-week MA which is currently at 1,518, it is likely to slide lower to test the all critical psychological support level of 1,500. If the 1,500-point support level does not hold, the next important support level to watch is the pivot low at 1,474-point level; beyond which, the possible target will be the 23.6% Fibonacci retracement level at 1410.
On the daily chart, the FBM KLCI formed a black hammer candlestick, a bottom reversal candle pattern, which indicates active bargain-hunting activity when the key index approached the long term 240-day MA support area. The FBM KLCI may continue with its rebound to move higher today. However, the down gap which formed last Friday will post as strong resistance to the rebound. On top of that, the 200-day MA which is currently at 1,530 and the 120 & 150-day MA which are now at 1,540 will also post as strong resistance. In order to reverse the current downtrend, the FBM KLCI will have to move above the 1,553-point level follow by the 1,566-point level. The 240-day MA also coincided with the 23.6% Fibonacci retracement level at 1,513, measuring from the pivot low on May 27 2010 to the pivot high on July 11 2011. A close below this 23.6% Fibonacci retracement level will likely see the FBM KLCI moving lower to the next Fibonacci level of 38.2% at 1,462-point level.
Both weekly and daily MACD continued to slide lower, indicating the pick up in downward momentum. Weekly RSI (14) has broke below the 50-level and is now at 46.2, indicating the weekly relative strength has turned mildly bearish. Daily RSI (14) is at 28.6, has turned very bearish and is currently moving into the short term oversold zone. Weekly Stochastic has crossed below the 50-level and is at 43 now, indicating a rapid weakening of the weekly market strength and continuation of the weekly down cycle. Daily Stochastic, however, has hooked up marginally to 21.5 from 20.8, reflecting the rebound on Friday. Overall readings from both the weekly and daily indicators showed that the FBM KLCI is currently very bearish and weak, and may continue to consolidate.
The short term trend of the FBM KLCI remained down; the medium term trend has turned sideways while the long term uptrend is at challenge now. As the FBM KLCI has closed below the 200-day SMA, technically, the benchmark index is considered bearish now, and this could turn out to be the beginning of a long term bear trend. Immediate downside support zone is at 1,517 to 1,509 while the overhead resistance zone is at 1530 to 1,540.
Last Friday, the Dow rebounded +60.93 points or +0.54% to close at 11,444.61. This week, the FBM KLCI is likely to trade within a range of 1,453 to 1,553, and for today it is likely to trade within a range of 1,491 to 1,550.
This week's expected range: 1453 – 1553
Today’s expected range: 1491 – 1550
Resistance: 1533, 1541, 1550
Support: 1491, 1500, 1512
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