Index futures likely to trend lower


By G.M. TEOH

LAST CLOSE (Jan 30): 666.5 points, down 0.1 of a point from a week ago. Week’s high: 680.5 points; Week’s low: 659.6 points. 

The Malaysia Derivatives Exchange (MDEX) CI futures prices traded in a choppy fashion last week as speculative traders jumped in and out of the market influenced by the developments in Iraq crisis.  

Long-liquidation selling ahead of the Chinese Lunar New Year holidays kept a lid on advances in late trading. 

The January 2003 futures expired at 660.5 points.  

The February 2003 contract ranged widely from a week's high of 680.5 points to 659.6 points and closed the week lower at 666.5 points.  

Total volume for the week was boosted by month-end rolls and increased to 6,873 contracts from 4,642 contracts previously.  

Open-interests as at Thursday’s close declined to 2,982 contracts from 3,328 contracts previously.  

Based on chart, the February 2003 index futures prices are expected to stay volatile and continue with its wide range trading this week.  

Developments in the United Nations on the Iraq issue and reaction to US Secretary of State Colin Powell's speech in the UN on Wednesday will provide the basis for fresh volatility in the coming shortened three-day trading week.  

For the moment, we have a trading-market and it is very difficult to hold on to a strong trading view for too long.  

Generally, people are expecting the market to ease as the war drums beat louder and they anticipate a strong rebound when the missiles start to drop.  

This may not be the case as compared to the 1990 Gulf War.  

The impact of this war is expected to be different as it could incite worldwide attacks on the US and its allies' economic interests, especially oil fields.  

Technically, the daily charts are showing an immediate support at the 660-665 levels.  

Violation of these supports in the week could take the February futures lower to test its minor chart-support at the 640-650 points. 

Chart-resistance for this week remains unchanged at the 670.0-675.0 levels.  

The daily and weekly technical indicators closed the week mixed- to-slightly bearish and called for further weakness in the market this week. 

The daily Money Flow Index (MFI): The daily MFI declined from its week's high of 63.72 points on Jan 28 and settled the week sharply lower at 50.56 points.  

Analysis of the daily MFI shows that distribution pressure could carryover into this week’s trading.  

The weekly MFI ended sharply lower at 56.49 points and indicated that the near-term trend is negative. 

The 3-day and 7-day exponentially smoothed moving-average price-line (ESA) turned choppy last week and closed the week on a bearish note.  

The 3-day and 7-day ESA-lines settled the week lower at 667.00 and 669.00 points respectively.  

Analysis of ESA-lines shows that the negative cycle could continue into this week’s trading.  

Daily stochastics: The daily stochastics gave the short-term buy-signal on Jan 28 and closed the week on a slightly positive mode.  

The daily oscillators per cent K and D ended sharply higher at 44.90% and 34.87% respectively.  

Analysis of the daily stochastics shows that the early sell-off last week had resulted in the market becoming slightly oversold and what we are seeing could just be a mild upward correction before the downward trend continues.  

The weekly stochastics gave the sell-signal during Thursday’s close and ended with the per cent K and D at 76.941% and 76.63% respectively.  

Analysis of this weekly oscillator shows that the near-term trend of the market is bearish. 

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) finally triggered the sell-signal and closed Thursday on a bearish note.  

The daily MACD and trigger-line settled lower at 7.03 and 7.95 points respectively.  

Analysis of the daily MACD shows that the market could move into a lower trading range this week.  

The weekly MACD stayed constructive for the near-term trend and closed the week positive.  

The weekly MACD and trigger-line settled higher at minus 10.91 and minus 15.01 points respectively. 

Daily Relative Strength Index (RSI): The daily RSI fell from a week's high of 61.43 points on Jan 28 and closed the week moderately lower in the positive territory at 54.28 points.  

Analysis of the daily RSI indicates that the index futures prices immediate underlying strength is still negative.  

The weekly RSI closed Thursday fractionally lower in the negative territory at 49.83 points and signalled that the underlying strength momentum of the near-term market is weak. 

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