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World Markets Rebound, KLCI Slightly Cautious
Malaysia Perspective | 16 April 2009

Kuala Lumpur Composite Index (KLCI) – Market Still In Consolidation

Markets around the world rebounded in the middle of March following a rally in the US. Investors went bargain-hunting as there was a slight improvement in volume. The Malaysian market has always been defensive. The KLCI rebounded about 5% from the month low while most other major markets rose more than 15% from the low. The KLCI tested 890 points twice in the last few days of March and only managed to settle at 885.43 points, 5 points lower on-month.

The KLCI is currently slightly above the longer term 90-day

moving average. The KLCI has been below this moving average

since February last year. The KLCI failed to stay above this averageafter breaking through last month, so this is the second occurrence this year.

This is a technical indication that the market may have bottomed. The momentum started becoming bullish as well. RSI and Momentum indicators are favouring the bulls. Despite the bullish movement, expect resistance when the KLCI goes to about 920 points.

FTSE Straits Times Index (FTSTI) – Pullback Early In The Month

The FTSTI rebounded strongly in the second week of March when the low was at 1455.47 points. It is currently at 1,745.66 points, a 20% rally from the low. Positive developments in the US uplifted investor confidence. The technical rebound was long overdue as the market had kept falling since the beginning of the year.

The FTSTI is up 150.8 points or 9.4% on-month. Market is currently bottom-ish as a doublebottom chart pattern is currently forming. To confirm the bottom, the index has to break above the neckline at 2,000 points.

The FTSTI broke above the longer term 90-day moving average. It needs to stay above this moving average to turn the current longterm trend to bullish. Momentum indicators like RSI and MACD indicate strong bullish strength.

However, the Stochastic indicator is currently heavily oversold and just crossed below its three-period moving average. This indicates a pullback in the current short-term rally. Therefore, expect the market to correct downwards in the earlier part of this month and if the market does not rebound, then it may just continue the current downtrend.


Hong Kong Hang Seng Index (HSI) – May Be In A Volatile Trading Range

The Hong Kong market made a good rally in the past one month especially in the last week of the month following the US rally. The HSI climbed 2,775 points or 24% from a low of 11344.58 to the current level at 14,119.50 for three consecutive weeks. HSI climbed 1300 points or 10% on-month. The market is generally speculating on the economy’s recovery amid better corporate earnings and economic data in the US. Trading volume increased substantially this month compared to previous months.

The HSI has just broken above the longer-term 90-day exponential moving average. The rally caused momentum indicators like the RSI and MACD to show positive signs that the bulls have taken over in the short-term trend.

However, the Stochastic indicator is currently at 93, indicating a very oversold situation. The Stochastic indicator is also indicating that a pullback may occur because it crossed below the 3-period exponential moving average. The HSI is expected to correct downwards further in the early part of the month and may generally be in a volatile trading range this month between 12,000 and 15,000 points.

US Dow Jones Indus trial Average (DJI) – Still In Consolidation

Better-than-expected corporate earnings and imports have led to a positive market speculation that drives the DJI from a low of 6,600 points to the current level of 7776.18 points. The market finally rebounded after two months of bearish movement. The 18% increase from the low three weeks ago provided positive vibes to investor sentiment all around the world. On-month the DJI climbed 10%. The US dollar weakened against other currencies.

The DJI is still below the longterm 90-day exponential moving average, which is at 8,084 points. This may provide a resistance to the DJI and furthermore, the Stochastic indicator shows that the DJI is very overbought and the market is expected to pullback from the current uptrend rally soon.

The RSI and MACD indicator indicates strong bullish momentum and there is a high chance that price can continue the uptrend after a correction. The DJI needs to break and stay above this moving average to continue the uptrend but at the moment, the market is still in a sideways consolidation and is expected to stay this way until further buying.


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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