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Saturday January 5, 2013
MARKET TRENDBy K.M. LEE
REVIEW: Bursa Malaysia kicked off the last day of 2012 on the negative side, with the FBM Kuala Lumpur Composite Index (FBM KLCI) shedding 2.93 points to 1,678.40, as profit-taking activity set in following a series of uptrend.
The overall market sentiment was pretty cautious, depressed by an extended fall in Wall Street overnight, as the White House and US lawmakers closed in on the “fiscal cliff” deadline with no deal in sight.
A pullback in most major Asian markets on profit-taking activity during the holiday season lull added to the downbeat note.
Given the dearth of fresh market-stimulating leads on the horizon, the local bourse succumbed to light liquidation to flirt in the red zones, but within a narrow range.
And that was the trend from the opening bell until the last minute, where buying in select heavyweights emerged suddenly to help the market reversed early weaknesses to end 2012 at a new record of 1,688.95, up 7.62 points on Monday.
World markets including Bursa Malaysia were shut on Tuesday for the New Year. While all of us were enjoying the holiday, optimism about the immediate direction of risky assets grew stronger, because a settlement in the “fiscal cliff” crisis in the US fuelled bullish sentiment across markets.
As expected, stocks in the region resumed business on solid grounds, with major Hang Seng Index leading the way, up nearly 3%.
Usually, the local bourse would mirror the offshore pattern, but in an unprecedented move, blue-chip counters reversed trend, as local institutional players opted to book profit from recent spikes.
Unlike the quality issues, non index-linked companies were mostly steady on greater retail participation and the two-tier market was clearly shown on the score card.
In spite of the FBM KLCI dropping 14.23 points to 1,673.72, winners beat decliners by 373 to 335 in mid-week.
Come Thursday, global equities sustained the upward thrust and the bulls on the domestic front took the opportunity to strike back.
Blue chips topped the gainers list while second and lower liners dominated the active page.
On the back of the better sentiment, the key index hit a new all-time high of 1,692.25, up 17.93 points that day.
It scaled another new peak of 1,699.68 in early session yesterday before retreating to close down 0.07 point to 1,692.58 owing to an apparent profit-taking activity.
Statistics: Week-on-week, the key index rose 11.25 points, or 0.7% to 1,692.58 yesterday, against 1,681.33 on Dec 28.
Total turnover for week ballooned to 4.093 billion units valued at RM6.020bil, compared with 2.920 billion shares worth RM3.941bil done previously.
Technical indicators: After triggering a sell at the overbought area in mid-week, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index weakened further to finish at the 66% and 73% respectively.
Likewise, the 14-day relative strength index retraced slightly from the top to end at the 69 points level.
In stark contrast, the daily moving average convergence/divergence (MACD) histogram continued to surge steadily, in tandem with the daily trigger line to keep the bullish signal.
Weekly indicators remained positive, with the weekly MACD and the weekly slow-stochastic momentum index keeping the buy call.
Outlook: Bursa Malaysia extended the upward momentum for the fifth consecutive week, largely due to “window-dressing” activity and funds taking fresh positions, as well as re-balancing their portfolios, with gains in the quality issues propelling the FBM KLCI higher to set a new record almost on a daily basis. The “fiscal cliff” resolution in the United States also aided local sentiment to some extent.
Based on the daily chart, the local bourse is bullish and it will remain so, as long as the key index continues to flirt inside the newly-established upward channel and supported by the rising 14-day and 21-day simple moving averages.
However, investors should take note that the local market has chalked up a total of 109.01 points, or 6.9% over the past five weeks and the bulls are starting to look tired. The next logical move would be to pause for air before resuming their rally later.
While we expect blue chips to correct in the short-term to avoid overheating, second and lower liners, a favourite for retail investors, are showing signs that they are ripe for a rally.
Technically, the daily and weekly MACDs are promising, but given the overbought condition, the local market is likely to consolidate, probably within a tight range this week.
Resistance is expected at every 20- or 30-point intervals above the 1,700-point psychological barrier.
Important support is pegged at the 1,680 points, followed by the 1,670 points and the next, at the 1,660-point mark.
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