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The market remains its uncertain sideways direction. The FBMKLCI rebounded last week after a decline two weeks ago. On a week to week basis, the benchmark index climbed 11.11 points or 0.7% to 1,532.29 points Thursday after trading between 1,507.64 and 1,538.54 points. The market has been trading sideways for the past one month, unable to break below or above the support and resistance levels. A market around the regions was in a consolidating more as well.

There is not much news to bring confidence to the equity markets. Bank Negara has raised the key overnight policy rate 25 basis points to 3.0% last week. The hike however, was not able to affect the equity market and the market rebounded after the announcement. Trading volume is relative lower, declining for four consecutive weeks. 900 million shares exchanged hands daily on average last week as compared to 994 million shares two weeks ago and 1,200 million shares three weeks ago. The relatively low volume and sideways movement shows that the market is still in a correction.

There is also lack of news in the global economy as commodities prices started to consolidate last week after a steep pullback two weeks ago. Crude oil in NYMEX continues to trade below the US$100 mark at US$99.27 a barrel. It was a volatile week because the trading range was between US$94.63 and US$105.16. The same goes to gold price. After strong decline from its historical high two weeks ago, price of gold is trading at 1,506.50 an ounce on COMEX, slightly higher than previous week’s close. US dollar rebounded last week against major currencies, including Malaysia. The Malaysian Ringgit is currently at RM3.01 to a US dollar as compared to RM2.99 two weeks ago.

It will be quite hard to determine the direction of the market is it continues its consolidation mode. Trend wise is still bullish as the short to long term 30 to 90-day moving averages are still increasing. The FBMKLCI continues to trade between these averages. The index is above the Ichimoku cloud which has a range between 1,520 and 1,530 points. These indicators show that the market up trend is still supported well, despite the volatility and pullbacks.

The momentum of the trend seems to be slightly bullish last week as compared to one month ago. The RSI, Momentum Oscillator and MACD indicators has gone slightly above their middle levels and increasing. The MACD indicator is about to cross above its trigger line which triggers a bullish momentum. The Bollinger Bands indicator which bands became real tight early last week started to expand this week with the FBMKLCI staying above the middle band. This shows some bullish momentum developing last week.

The breakout in the wedge pattern last Wednesday indicates that the market correction may be over soon and that the sentiment has turned slightly bullish. Based on the pattern, its upside target from the breakout is 1,580 points. The target remains valid as long as the index stays above the immediate support line which is currently at 1,515 points. Key support and resistance levels remain at 1,480 and 1,540 points. From the current momentum, the index is expected to test 1,540 points soon and be slightly bullish this week.

Daily KLCI chart as at 12 May 2011 using NextVIEW Advisor Professional