Saturday August 18, 2012
An uptrend in slow motion
MARKET TREND By K.M. LEE
REVIEW: Bursa Malaysia extended the previous week's three-day winning streak on follow-through interest, with the bellwether FBM Kuala Lumpur Composite Index (FBM KLCI) rising 1.94 points to 1,647.30.
The overall underlying sentiment was positive, led by blue chips, encouraged by a moderately firmer showing in overnight Wall Street, as a weaker-than-expected reading in China's July exports buttressed expectations that policymakers would introduce more stimulus measures to shore up global economies.
However, an initial upward thrust of the local bourse fizzled out somewhat, simply because some investors opted to book profit rather than bidding stocks after the key index eclipsed the historical high of 1,647.94 points to set a new record of 1,650.42 points.
A generally lower performance of Asian equities also weighed on the local market, with Bursa mostly trapped throughout before ending up 0.96 point to 1,646.32 in sluggish trade on Monday.
Overnight Dow staged a pullback while crude oil prices slipped for a second day in a row, as exhaustion kicked in, exacerbated by disappointing Japan growth data.
Despite the reminder of the headwinds facing the global economy, most stocks in the Asia-Pacific bucked the US trend, as investors switched to defensive and undervalued issues pending more policy signals.
Riding on the regional strength, shares on Bursa drifted sideways to higher in cautious mood, with the key index settling at a new all-time peak of 1,652.90 points, up 6.58 on Tuesday. After a short pause, global markets edged down again on renewed liquidation pressure, shrugging off positive US retail sales and signs that the embattled eurozone may be faring better than feared.
While Tokyo was down 0.05%, Hong Kong fell 1.2%, Singapore was off 0.8% and Shanghai slipped 1.1%, the FBM KLCI fluctuated within a modest band for the most part of the day in the negative territory due to lack of leads.
But surprisingly, it managed to eke out a small gain in late trade, lifting the key index up 0.88 point to close at a fresh record of 1,653.78, largely due to a last-minute magic touch in select heavyweights. Despite the firmer close, losers overwhelmed winners by 410 to 335 in mid-week.
In lacklustre session, the local bourse shed 3.69 points to 1,650.090 on Thursday, and lost an extra 0.3 point to 1.649.79 yesterday, ignoring a steadier overseas performance.
Statistics: On week-on-week basis, the main index chalked up a total 4.43 points, or 0.3% to 1.649.79 yesterday, versus 1,645.36 at the close on Aug 10. Total turnover for the week amounted to 6.156 billion shares valued at RM6.716bil, compared with 5.837 billion units worth RM8.217bil done previously.
Technical indicators: The oscillator per cent K fell below the oscillator per cent D of the daily slow-stochastic momentum index to trigger a short-term sell at the overbought area on Thursday and they appeared in danger of moving out of the bullish territory. Likewise, the 14-day relative strength index pulled back slightly from a reading of 76 to end at 66 points.
Although the daily moving average convergence/divergence (MACD) histogram had issued a buy on Tuesday, the momentum appeared to be easing.
Weekly indicators were painting a different landscape, with the weekly slow-stochastic momentum index calling a buy and the weekly MACD sustaining the moderate upward expansion against the weekly trigger line.
Outlook: Bursa posted gains for a third week in a row but the advances recorded were small despite the FBM KLCI establishing new all-time highs on a daily basis.
What we are seeing apparently is an uptrend that seems to be happening in slow motion, showing characteristics akin to the previous leg of uptrend. Anyway, it is not surprising, given that global markets were caught between economic worries and hopes of monetary easing.
But what is more important is that the bulls have given the confirmation that they are now on course for a second upward wave.
With hopes of economic stimulus continuing to draw interest and keeping global equities alive, the local bourse is likely to stay above water in the short term in the coming holiday-shortened week.
Technically, some indicators are weakening, implying the local bourse may turn sideways, but I reckon it would be more of a range-bound pattern, with a mild upward bias.
Crucial support floors are pegged at the ascending line of 1,643 points, followed by the 14-day simple moving average (SMA) of 1,641 and 21-day SMA of 1,638, of which a clear violation would have a negative impact on the immediate outlook of the market.