FBM KLCI - sign of temporary bottom

Stocks on Bursa Malaysia closed lower yesterday amid uncertainties in the local politics and the global economy. The FBM KLCI ended 1.52 points or 0.10% lower at 1,582.28 after opening 3.23 points lower at 1,580.57. Losers outnumbered gainers by 409 to 273 while 348 counters were unchanged. Total market volume decreased to 1.42 billion shares worth RM1.55 billion from Monday’s close of 1.663 billion shares worth RM1.595 billion.

Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened with a down gap of 3.23 points at 1,580.57 and slid lower to the intra-day low of 1,579.04. The key index rebounded from the low to touch the intra-day high of 1,583.29 and stayed sideways in a tight range for a major part of the day before a last minute buying in selected blue-chips helped to lift the index higher despite being in the red the whole day. Chart-wise, the FBM KLCI formed a small white spinning-top candlestick in a possible star position which indicates indecision of market direction with the appearance of buying support at current level, and the key index may stage a rebound or continue to consolidate at present level. Immediate downside support zone is at 1,579 to 1,573, where 1,573-point is the 60-day SMA support.

MACD and its histogram continued to slide lower, indicating a continued loss in the index’s momentum. Nevertheless, the MACD line is still above the zero-line, indicating the present weakness may still be a correction in a bull market. RSI (14) was marginally lower at 44.6 from 45.7 previously, and showed sign of tapering off, indicating a slow down in the bearish relative strength, and the index continued to stay in the mildly bearish zone. Stochastic was at 14.2, and has slid lower to the oversold zone for the first time, indicating very weak market strength but a rebound maybe expected ahead. Readings from the indicators showed that the FBM KLCI is currently weak and mildly bearish, and the weakness may extend until there are signs of positive reversal.

The short term trend of the FBM KLCI is currently down, whereas the medium and long term trend still remained up. The FBM KLCI is currently sitting right above the medium term 50-day SMA which is now at 1,580-point, a continue break of this support level will likely see the key index sliding towards to 60-day SMA which is now at 1,573-point, and a break below the 60-day SMA would spell the end of the medium term uptrend. With all indicators showing weaknesses in the FBM KLCI, the key index is likely to remain in consolidation for a short while.

Overnight, the Dow rebounded +74.39 points or +0.58% to close at 13,001.56. Today, the FBM KLCI is likely to trade within a range of 1,575 to 1,588.

This week's expected range: 1577 – 1613
Today’s expected range: 1575 – 1588

Resistance: 1584, 1586, 1588
Support: 1575, 1577, 1579