Saturday August 11, 2012
Market poised for upward wave
By K.M. LEE
REVIEW: The Dow rallied 217.29 points to 13,096.17 and crude oil prices jumped US$4.27 a barrel to US$91.40 the previous Friday, the best since July 20, boosted by a better-than-expected US jobs report, supported by renewed optimism that European authorities would act to contain the eurozone debt crisis.
Taking the cue from a bullish US markets overnight, stocks in the Asia-Pacific rose on fresh buying momentum, climbing as much as 2%, led by the Nikkei 225 Index.
At home, Bursa Malaysia's benchmark, the FBM Kuala Lumpur Composite Index (FBM KLCI), quickly raced to a high of 1,641.03 after opening 0.54 of a point below the flat line at 1,634.50.
Sentiment on the broad front was positive, with core heavyweights leading the way, extending the previous session's gains amid follow-through interest. But unlike the overseas performance, momentum tapered off later, as some investors were quick to lock in profit, simply because the local bourse still was in consolidation mode following the multiple breakdown recently. In range-bound trade, the key index chalked up 4.39 points to 1,639.43 on Monday.
Overnight Dow and crude oil prices logged another gain the next day, rising 21.34 points to 13,117.51 and 80 cents to US$92.20 a barrel respectively, on continuous bargain hunting activity due to easing worries about the eurozone situation.
As expected, regional stock exchanges inched higher, with market players more willing to participate in risky assets that looked attractive after the recent steep correction.
Though overseas investors continued to bet that European authorities would take further action to tackle its debt crisis and the United States and China will adopt stimulus measures to support economic recovery, most of the local boys opted to stay on the sidelines, adopting the “wait-and-see” attitude.
Consequently, Bursa extended the consolidation process, with the bellwether FBM KLCI dropping 8.31 points to 1,631.12 in lacklustre trade on Tuesday but recouped some 4.80 points to 1,635.92 in a generally mixed note amid light bargain hunting in select blue chips on Wednesday.
Thereafter, the local bourse moved sideways on bargain hunting interest alternating with intermittent light profit-taking activity, awaiting for a fresh lead to emerge while the key index chalked up 6.60 points to 1,542.52 on Thursday and an extra 2.84 points to 1,645.36 yesterday.
Statistics: For the week, the major index added a total of 10.32 points, or 0.6% to 1,645.36 yesterday, compared with 1,635.04 on Aug 3. Weekly volumes stood at 5.837 billion units worth RM8.217bil, against 5.885 billion shares valued at RM8.193bil changed hands the prior week.
Technical indicators: The oscillator per cent K reversed up from the 60% level and climbed over the oscillator per cent D of the daily slow-stochastic momentum index to trigger a buy yesterday.
Although the daily moving average convergence/divergence (MACD) histogram still was flirting below the signal line to keep the sell signal, it had indicated an encouraging convergence pictogram. In stark contrast, the 14-day relative strength index hit a high of 65 points on Thursday before weakening slightly to settle at 63 points. Weekly indicators were tricky, with the weekly slow-stochastic momentum index sliding and the weekly MACD retaining the buy.
Outlook: After suffering an unexpected multiple breakdown during the recent correction that has brought about a conclusion to an earlier uptrend, shares on Bursa drifted sideways to marginally steadier amid fresh bargain hunting interest, helping the FBM KLCI to post gains for the second consecutive week.
Buying momentum in the past couple of weeks was largely buoyed by a rally in overseas equities on hopes that the European Central Bank would soon take decisive steps to address the lingering eurozone's debt crisis, compounded by growing optimism of economic stimulus from major central banks.
Despite the firmer trend, the overall breadth of the local bourse was not inspiring, with the scoreboard showing losers and winners almost equal or advancers trailing decliners on a good day. Evidently, there is a sense of caution on the broad front and going forward, it will be interesting to see how the bulls could convince investors to increase their participation. If successful, the gains over the past two weeks would be developed into a new upward wave. A breach of the historical peak of 1,647.94, set on July 19, would paint a more bullish outlook in the pipeline. Otherwise, Bursa is likely to be trapped on consolidation.
Technically, indicators are mixed to slightly positive, implying range trading, but with a mild upward bias this week. Current support is seen at the 14-day simple moving average (SMA) of 1,634 points. Lower floors are resting at the 1,635 points, 1,612 points and 1,595 points, also the 21-day SMA, 50-day SMA and 100-day SMA respectively.