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Market down but shows short-term bullish momentum
Malaysia Perspective | 08 January 2009

Kuala Lumpur Composite Index (KLCI): Strong Bullish Momentum In The Short Term

It was another month of uncertainty as the year ended. As expected, the KLCI traded in a tight trading range, between 835 and 888 points, lower than the previous month. It closed at 869.62 points before Christmas and this is very near the monthly closes for the past two months.

There was nothing much to mention about the Malaysian financial market’s performance in the past month. Investors were uncertain and decided to take a break at least until the New Year.

The KLCI is below the declining 60- and 90-day moving averages. This indicates it is still in a strong major downtrend. However, it is above the short-term 30-day moving average which started moving flat. Thus, the KLCI is currently in a downtrend correction mode: the triangle chart pattern confirms this.

The convergence between the KLCI and RSI indicator shows a strong bullish momentum in the short term. Expect the KLCI to stay sideways if traded between 800 (support) and 940 (resistance) points. With strong momentum, it might be able to test this resistance level.
Singapore Ftse Straits Times Index (FTSTI): Strength In Short-Term Rally

Singapore’s market volatility has eased further. The Monthly Average Range fell by half from about 600 points two months ago to 300 points. The STI was expected to be range-bound and it did just that.

It traded sideways for two months, trading between 1638 and 1844 points this month, closing at 1736.99, near last month’s close. Investors continued to stay in the sidelines waiting for more positive developments in times of recession.

Technically, the STI is below the mid- and long-term 60- and 90-day moving averages. This indicates it is in a major downtrend. The STI is currently hovering above the short-term 30-day moving average but the average is still declining. It is in a major downtrend correction with revised support and resistance levels at 1580 and 1900 points respectively. A triangle chart pattern confirms this correction.

Hong Kong Hang Seng Index (HSI): Downtrend Correction

The HSI traded sideways with a slight bullish strength. It tested the 15,000-point resistance level but failed to stay above it. The HSI is currently at 14,184.14 points, slightly higher than the previous two month’s closes. The trading range this month was about the same as the previous month’s, trading between 13,344 and 15,781.

The HSI is still in a major downtrend as it is below the mid-tolong- term moving averages which are declining. These declining averages show the downtrend is still strong. The short-term trend is up with strong bullish momentum because the RSI is also rising.

However, this short-term uptrend formed a correction pattern called the wedge, which is normally a continuation of a trend – in this case, a downtrend. This can happen if the HSI breaks below the wedge’s support level. The resistance remains at 15,000 points and the support level is 12,000. Falling below this support will show a possible continuation of the downtrend.
There is some strength in the short-term upward rally as shown by a convergence between the STI and RSI indicator. The STI is expected to stay within this range but with this little strength in momentum, it may test the resistance level.

US Dow Jones Indus trial Average (DJI): May Test Resistance Level

The US is currently desperately trying to ease the economic slowdown and crisis faced by many financial institutions. For the first time in history, the central bank lowered its target range for federal funds rate to between zero and 0.25% (where the rate currently is).

Despite aggressive rate cuts in the past few months, the US equity market remained weak. The DJI trading between 8188 and 9026 points, closing at 8468.48, about 4% lower than the previous month.
Charts produced from NextVIEW Advisor Professional.
The DJI is currently in a downward correction mode. The short term trend (30-day moving average) is slightly up but the major trend is still down. The support level remains at 8000 points while resistance has been revised from 9600 to 9000 points, due to the tighter trading range and stronger resistance.

The rising RSI shows there is still strength in the bullish momentum. Therefore, the support level may be strong and there is a higher chance of the DJI testing the resistance level. If it does fall past 8000 points, we may see further downward movement.

Benny Lee

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical analysis. The commentary should not be construed as investment advice or any form of recommendation. Should you need investment advice, please consult a licenced investment adviser.

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