Kuala Lumpur Composite Index (KLCI): Time For A Pullback
While other regional markets started to go into a correction mode, the Malaysian equity market remained in a bullish mode last month after forming a reversal early in the month. Some positive catalysts in the financial market included rising crude palm oil prices, better-than-expected financial and economic data in the US, and the liberalization of the Bumiputera quote for companies in 27 services sub-sectors.

The KLCI surged 107.25 points or 12% on-month to close at 992.68 points on 24 Apr. Trading volume increased tremendously in the previous two weeks, exceeding two billion shares on some days.

The index broke the expected 920 points resistance with ease and soared further. The short- and long-term 30- and 90-day moving averages started to increase, signalling an uptrend. The averages are currently between 900 and 915 points. The momentum of the uptrend has been strong as well.

However, the current uptrend is steep upwards and may not be sustainable. It is currently overbought and a pullback is expected down to the averages between 900 and 915 points. The resistance is at the psychological 1,000-point level.

FTSE Straits Times Index (FTSTI): Further Downward Correction
The FTSI was bullish in the first three weeks of April and started to correct in the last week. The FTSI went as high as 1,947.30 points last month, near the 2,000 points resistance level from the double-bottom chart pattern formation, before settling at 1,852.85. The STI was up 107 points or 6% on-month. The bullish factor was the better-than-expected financial and economic data in the US, Singapore’s largest trading partner. There is still a concern over the sustainability of the economic improvement.

The longer-term moving averages (60- and 90-day moving averages) have started to increase slightly last month indicating a bullish trend. There is a divergence between the momentum indicators and the FTSTI: this means the uptrend is getting weaker.

The averages are currently between 1,700 and 1,750 points. Therefore at 1,852.85 points, the FTSTI is still considered overbought and expected to correct further downwards towards this range level.

If price breaks above the resistance level at 1,950 points, then we may expect the FTSTI to continue the uptrend.

Hong Kong Hang Seng Index (HSI): More Downside
The Hong Kong equity market had a strong bullish run in the first three weeks of April before entering a pullback. The HSI surged to as high as 15,977.13 points but fell to 15258.85 points on 24 April. On-month, the HSI is up 1,139.35 points or 8%.

The better-than-expected corporate results in the US boosted confidence in the market for investors to continue buying shares. However, trading volume started to decline slightly compared to the volume in March. Investors are more cautious because the market already climbed 24% from the low of 12,125.80 points in March.

The longer-term moving averages (60- and 90-day moving averages) increased slightly last month indicating a bullish trend and its strength is still considered strong because the momentum indicators are still in convergence with the HSI. The averages are currently between 13,500 and 13,800 points. At current levels, the HSI is still overbought until it comes back to the averages. Therefore, expect more downward movements in the markets this month unless the HSI breaks above the 15,900 points resistance level.

US Dow Jones Industrial Average (DJI): Fails to break resistance
The US equity market has been bullish in April although at a slower pace. In March, the DJI increased 17.3% on-month but the increase in April was only 3.8%. On 24 April, the index closed at 8,076.29 points. The sentiment boost from improvements in short-term economic data in March has started to ease.

The DJI failed to break above the intermediate downtrend resistance line. The increase in the equity market does not reflect improvements in the economy as analysts said the economic recovery is still not within sight. Investors remain cautious for now.

The DJI is currently hovering just above the short- and long-term 30- and 90-day moving averages. The long-term trend is still bearish because the longer-term 60- and 90-day averages are still declining. The short-term uptrend momentum has started to weaken.

Since early April, the RSI indicator is in divergence with the DJI. Resistance has become obviously strong. Therefore, expect the downtrend to continue to the support level at 7,000 points if the DJI fails to go above the current resistance at 8,170 points.