LAST close (Jan 10): 635.82 points, up 2.32 points from a week ago. Week’s high: 636.97 points; Week’s low: 623.30 points.
The KLSE Composite Index (CI) drifted lower in quiet trading for most of the sessions and rebounded sharply in late trading from moderately active buying from local funds and the firmer index futures prices following news that newly formed local asset management company Valuecap Sdn Bhd had started to buy stocks. Valuecap, an investment company which is equally owned by Khazanah Nasional Bhd, Kumpulan Wang Amanah Pencen and Permodalan Nasional Bhd is expected to purchase up to RM10bil worth of stock in the near-term.
Most of the key index-linked blue chip stocks recovered part of or all of its earlier losses during Friday’s close. Maybank, Maxis Communications, MISC, Sime Darby, Plus Expressways, Genting, Commerce Asset and Hong Leong Bank all closed with minor gains and lifted the index by a combined 3.64 points. Tenaga Nasional, Telekom, Petronas Gas and Public Bank all finished in the minus column and eroded the index by a combined 3.36 points.
Total weekly volume of the 100-stock CI improved to 140.10 million shares from 122.30 million shares previously. Average daily volume for the week declined to 28.02 from 30.57 million shares a week ago.
Chart-wise, the CI closed the week positive. The strong technical rebound and upward wave on Friday that allowed the index to regained almost 50% of its late-December 2002 declines in a single session signalled that the market could stay structurally bullish for the immediate term.
Based on the daily chart, the CI has an immediate support for this week at the 630.00-633.00 level. Unless the bullish momentum resumes in the early part of this week, we may get to see some mild pullback. In any case, violation of this chart-support should provide an opportunity for bullish short-term traders to build up positions in some of the main index-linked stocks like Maybank, Telekom, Tenaga Nasional, Maxis Communications, MISC, Genting and Petronas Gas. These stocks would provide the necessary strength for the CI to continue with its upward technical rebound and possibly test its late-December 2002 highs at 650.00 points.
Chart-resistance for this week is adjusted higher to the 645.00-650.00 level. If the underlying strength of the market is solid, we may get to see a test of this immediate chart-resistance level this week. From a technical point of view, it does not take very much effort from the main index-linked stocks to lift the index back to these late-December 2002 highs. The big question is: Can the index sustain and resume its upward rally from there?
The daily and weekly technical indicators ended the week neutral-to-slightly bullish and suggests that the upward adjustment would sustain this week.
The daily Money Flow Index (MFI) recovered from an intra-week low of 56.80 points and finished the week slightly lower in the positive zones at 59.14 points. As at Friday’s close, the MFI has signalled that the distribution process is temporary over. The weekly MFI settled the week higher at 45.11 points. Analysis of the weekly MFI indicates that the near-term market could trend higher.
Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines ended the week neutral. Closing prices above the MAV-low line for the first time in seven sessions signalled that the index is positive. Closing prices above the MAV-high line at 636.00 points this week would confirm that a trend change has started.
Stochastics: The daily stochastics turned bullish for the immediate term market when it triggered the buy-signal on Jan 9. The daily oscillator per cent K and D ended the week higher at 34.64% and 17.87% respectively. Analysis of this daily oscillator indicates that the CI is in an upward cycle. The weekly stochastics finished the week with the negative intact and indicated that the index’s main trend is still negative. The weekly oscillator per cent K and D settled the week slightly higher at 69.88 and 70.55 % respectively.
The 3-day and 7-day exponentially smoothed moving-average lines converged strong during Friday’s close and signalled that the index is attempting a trend change. The 3-day and 7-day ESA-lines closed the week lower at 631.30 and 631.80 points respectively. A successful crossover this week would confirm that an upward cycle has started.
Relative strength index (RSI): The daily RSI rebounded strongly from an intra-week low of 37.34 points on Jan 8 and ended the week higher in the negative zones at 49.80 points. The daily RSI has indicated a turnaround in the immediate underlying strength of the index and called for more upward adjustments this week.
The weekly RSI regained part of its earlier loses and ended the week slightly higher at 38.18 points. Analysis of the weekly RSI shows that the index’s main trend is neutral-to-slightly positive for the near-term.
Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) became positive and triggered the buy-signal on Jan 10. The MACD and trigger-line settled the week higher in the negative zones at minus 1.79 points and 2.23 points respectively.
Analysis of the daily MACD indicates that the bearish cycle is temporary over and signals the start of an upward wave. The weekly MACD (not shown in the chart) expanded on its buy-signal of a week ago and indicated that the index’s main trend is constructive. The weekly MACD closed above the trigger-line and settled higher in the negative zones at minus 19.61 and minus 20.88 points respectively.