FBM KLCI - beginning of a bear trend?

Stocks on Bursa Malaysia closed on a bearish note yesterday as renewed concerns over the Eurozone debt crisis and weak economic data dampened investor sentiment globally. The FBM KLCI ended 8.05 points or 0.51% lower at 1,583.80 after opening 0.02 of a point higher at 1,591.87. Losers outnumbered gainers by 581 to 199 while 291 counters were unchanged. Total market volume improved to 1.663 billion shares worth RM1.595 billion from Friday’s close of 1.631 billion shares worth RM1.475 billion.

The FBM KLCI opened 0.02 of a point higher at 1,591.87 and surged to the intra-day high of 1,592.45 right after opening. The key index came under strong selling pressure and slid lower for the rest of the day with intermittent weak rebound, it hit the intra-day low of 1,580.28 before rebounding on last minute buying of selected blue-chips to close off low. Chart-wise, the FBM KLCI formed a bearish long black candlestick which indicates sellers were dominant throughout the day, and the selling pressure may continue into today. Hence, the FBM KLCI is likely to further correct downward with immediate critical support at 1,580 provided by the 50-day SMA which coincides with the lower channel support line. A break or close below the 1,580-point level would mean the end of the uptrend which started on the 26^th September 2011 and marks the beginning of a bear trend.

MACD and its histogram continued to slide lower, indicating a pickup in the downward momentum. RSI (14) slid below the 50 level to 45.7, indicating the short term relative strength of the FBM KLCI has turned mildly bearish. Stochastic continued to slide lower to 24.4, indicating weak market strength and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI is currently weak and bearish, and is likely to extend its downward action.

The short term trend of the FBM KLCI has turned bearish as the key index is closing below all the short term moving averages, i.e. the 5, 10, 20 and 30-day SMAs. The medium to longer term trend are however, still up. Anyway, trend change always starts with the short term to the medium and then to the long term, and as of now, the critical medium term 60-day SMA support is at 1,572, and the index may find some support here. A close below this critical medium term support would mean a big bear is coming.

Overnight, the Dow fell -102.09 points or -0.78% to close at 12,927.17. Today, the FBM KLCI is likely to trade within a range of 1,566 to 1,605.

This week's expected range: 1577 – 1613
Today’s expected range: 1566 – 1605

Resistance: 1591, 1598, 1605
Support: 1566, 1573, 1578