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Straits Times 3,134.71 +18.54 +0.59%
Hang Seng 26,664.28 +160.35 +0.61%
Dow Jones 27,024.80 +237.44 +0.89%
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Markets Soaring With Confidence
Malaysia Perspective | 15 June 2009

Kuala Lumpur Composite Index (KLCI): Higher Level Of Investor Confidence
The equity market has been bullish since March. The KLCI climbed as high as 1,059.88 points before settling at 1,044.11 points at the end of May. The index increased about 24% since March.

Investors were not taken aback by the weaker-than-expected quarterly GDP growth. The government announced a 6.2% contraction for 1Q09 and revised its full-year 2009 GDP forecast to contract between 4% and 5%. The KLCI rallied in tandem with the rallies in regional markets: most markets climbed more than 50% from their March lows. However, trading volume decreased for the last two weeks of May indicating a little uncertainty.

The KLCI broke and stayed above the psychological resistance level of 1,000 points, indicating a high level of investor confidence. The next resistance is at 1,080 points, the 38.2% Fibonacci retracement level from the long-term bear trend since January 2008. With the current momentum, there is a high chance of price testing at this level.

Going beyond this level would require more positive catalysts. The technical support is 1,000 points, the previous resistance.

FTSE Straits Times Index (FTSTI): Likely To Test 2,400PT Resistance
Market sentiment and confidence in Singapore seem to be growing stronger with the FTSTI breaking the 2,000-point resistance level and closing at a seven-month high. The benchmark index closed at 2,329.08 points at the end of May, climbing 56.8% from the low in March.

The market continues to be bullish despite weaker technical indications. Investors are responding to recent economic developments both locally and internationally. Total manufacturing output of Singapore in April rose 24.7% on month.

The next resistance level would most likely be at 2,400 points, the 38.2% Fibonacci retracement level from the longer term bearish trend since October 2007. There was no major correction from the current bullish trend and the market is climbing exponentially. The momentum indicators are still in divergence which means a weaker uptrend but there is a high chance of the index testing the Fibonacci retracement level above.

More positive catalysts are needed to push the market beyond this level. The support level is currently at the previous resistance of 2,000 points.

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Hong Kong Hang Seng Index (HSI): Strong Upward Momentum
No market in the region shows as strong a bullish sentiment as seen in Hong Kong. The equity market continues to make new highs and break a few technical resistances in a month. The HSI closed at 18,171.00 points at the end of May, surging 21% in a month. So far, the HSI has climbed 60% from the low in March this year. Investors are confident about the recent economic developments which are expected to improve its economy.

The HSI became very bullish once it broke the 15,900 points resistance level. There was no major pullback in the current uptrend rally despite being overbought for weeks. Investors and traders were picking up stocks at slight pullbacks as most of them did not want to miss the current wave.

Momentum indicators are indicating strong upward momentum which means that there is a high chance of the HSI testing the next resistance level at 19,150 points, a 38.2% Fibonacci retracement level from the longer term bearish trend since October 2007. Immediate support level is at 17,680 points while stronger support level is at 15,700 points.

US Dow Jones Industrial Average (DJI): More Upside Above 8,600PTS
The US market has been moving sideways with a tight trading range in May after breaking the resistance levels of 8,170 and 8,300 points. The DJI closed at 8500.33 points end-May after trading between 8,250 and 8,580 points. The index grew about 30% from the March low.

The market is a little uncertain because key economic indicators, such as unemployment rate continues to rise, and the mortgage crisis that has now moved toward prime mortgages create some doubts on whether the economy is really improving. The market was earlier boosted by better-than-expected monthly corporate earnings.

The DJI retraced about 28% from the longer term downtrend since October 2007. The next significant retracement level is the 38.2% Fibonacci level which is at 9,420 points. With a strong bullish momentum and sentiment, there is a high possibility of the DJI climbing to this level because most markets have retraced near this level.

A break above the current resistance level in this trading range at 8,600 points would boost this possibility. However, expect more downside moves if the support level of 8,250 points is broken. The next support level would be 7,900 points.

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