More congested trading expected


INDEX FUTURE 

LAST CLOSE: (Oct 15) 847.0 points, off 11.5 points (-1.34%) from a week ago. Week’s high: 856.0 points: Week’s low: 842.5 points. 

The Bursa Malaysia Derivatives index futures prices dropped in early trading and stayed in sideways to lower trading for most of the week before closing Friday with minor losses. Stale-bull long liquidation and profit taking linked to short covering kept the market in a moderate 14-point range. 

Last week’s losses resulted in the market returning almost all of its late-September 32.0 points bullish rally gains. Currently, there is an element of caution among bullish players and most technical traders are worried that a minor sell-off would take place in the event of a break below the late September-low level of 840.0 to 835.0 points. 

Record bullish performances in the crude oil prices and expectation of a sharp bearish reaction from main exchanges in the world would continue to dampen any bullish sentiment. How and when the impact of record crude oil prices would hit global markets is unknown. What is known is that “the only thing that is certain about markets is the uncertainty”. Most major market swings and volatile reversals often take place when you least expect it to happen. Index futures contract would provide the perfect opportunity for stock traders and funds to hedge and manage their portfolio risk during this period of uncertainties. 

The October futures prices ranged from the week's high of 856.0 to 842.5 points and ended the week moderately lower at 847.0 points, off 11.5 point from previously. 

Total volume for the week declined sharply for two-straight weeks to 9,761 contracts from 18,492 previously. Total open interest as at Thursday’s close dropped to 10,707 contracts from 11,894 a week ago.  

The daily candlestick chart ended the week slightly positive and indicated that the immediate term trend could congest with a downward bias. The bullish hammer (candle with a long lower shadow) that occurred last Thursday failed to develop a bullish character and give rise to suspicion that the underlying strength of the immediate term market is still weak.  

An immediate chart support for the October futures is seen for this week at the 846.0 to 842.0 level. A successful downward breakout from these levels would set the stage for a downward move and sent the market lower to test the late-September lows around the 835.0 to 830.0 level. Chart resistance for the October contract is pegged at the 848.0 to 853.0 level. Minor chart resistance stands at the 855.0 to 860.0 level.  

The daily and weekly technical indicators closed the week neutral to negative and indicated that the immediate term trend would remain under pressure. 

Daily Money Flow Index (MFI): The daily MFI declined from the week's high of 52.56 points on Oct 11 and ended the week sharply lower at 8.63 points. Analysis of the daily MFI indicated that negative distribution in the form of fresh selling and long liquidation occurred last week. The weekly MFI ended the week fractionally higher in the positive zone at 57.32 points and showed that the near term market would remain under pressure. 

The trend tracker indicator, 3-day and 7-day exponentially smoothed moving -average price line (ESA) gave the short-term sell-signal on Oct 8 and ended the week in bearish divergence to indicate that the immediate cycle would stay negative. The 3-day and 7-day ESA lines finished the week lower with the 3-day ESA line below the 7-day ESA line at 848.74 and 851.22 points respectively. Meanwhile, the 3-week and 7-week ESA lines failed to give the sell signal for the near term trend. The 3-week and 7-week ESA -lines closed the week in negative convergence at 851.55 and 848.08 points respectively. 

Daily stochastic: The daily stochastic triggered the short-term buy signal on Oct 13 and closed the week positive. The daily oscillator per cent K and D settled the week lower at 38.54% and 26.32% respectively. Analysis of the daily oscillator shows that the market may enter into a mild upward correction. The weekly stochastic closed the week bearish for the near-term trend. The weekly oscillator per cent K and D settled the week lower at 57.58% and 69.67% respectively. 

Daily moving average convergence/divergence (MACD): The daily MACD (not shown in the chart) expanded on the sell signal of Oct 7 and ended the week bearish. The MACD and trigger line ended lower in the positive territory at 2.34 and 3.00 points respectively. Analysis of the daily MACD shows that the immediate trend of the market is negative. The weekly MACD remained slightly positive for the near-term trend. The weekly MACD and trigger line closed the week lower at 6.84 and 6.34 points respectively. 

Daily Relative Strength Index (RSI): The 9-day RSI (not shown in the chart) dipped from the week's high of 50.44 points on Oct 13 and ended lower in the negative zones at 44.06 points. Analysis of the daily RSI shows that the immediate underlying strength of the market is weak. The weekly RSI closed the week lower in the positive territory at 53.97 points and indicated that the underlying strength of near-term market is negative.  

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