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It was a bearish market last week with the FBMKLCI closing 1.8% lower in a week to 1,440 points Wednesday, weighed down by Tenaga Nasional. Market sentiment drops as Greece once again is expected to default and may create a ripple effect in the global economy. For the past one week, the FBMKLCI traded between 1,436.71 and 1,480.33 points. The close near the low shows the market was controlled by bears. Trading volume increased to a daily average of 921 million shares as compared to 770 million shares in the previous week. The trading volume was particularly high on 9th and 14th of September and this shows that there is some selling pressure.

FBMKLCI heavyweights Tenaga Nasional Berhad and Sime Darby Berhad lead the losses in the market on Wednesday. Tenaga is expected to incur higher costs amid shortage of gas supply. Investors are concerned about the Securities Commission probe into Sime’s acquisition of Eastern and Oriental Berhad. In global economic development, two major banks in France were downgraded by Moody’s last week because of the large exposure in Greece. The crisis-laden Eurozone may cloud investors’ sentiment for a long time as there are no apparent solutions.

Global equity markets closed lower with some volatility despite rebound last Monday. The Dow ended up 1.7% lower in one week at 11,246.73 points. London’s FTSE declined 1.7% lower to 5,227.02 points while France’s CAC40 index plunged 4% to 2,949.14 points because of the Eurozone crisis. In Asia, markets were not too optimistic with the rebound in western markets. Hong Kong’s Hang Seng Index fell 3.4% in a week to 19045.44 points and Japan’s Nikkei 225 index fell to its 28-month low after shedding 2.8% in week to 8,518.57 points. Singapore’s Straits Times Index declined 3.3% to 2,739.35 points. Outperform Asian markets Jakarta and Thailand fell 5% and 4.6% in a week respectively.

The uncertainty in the global economy pressures commodities prices as it continues the uptrend moderately. COMEX gold ended up US$4 higher in one week to US$1,824.20 an ounce. The double top chart pattern formation in gold price for the past one month shows that the price is toppish with US$1,900 as strong resistance level. For the past two weeks, crude oil is trading in a range between US$85 and US$90 a barrel with a slight bullish trend forming in the short term. Expect crude oil to trade between this range. Crude palm oil prices continue to trade sideways despite stronger exports and lower supply because of increasing US dollar. Crude palm oil price continues to trade between RM2,900 and RM3,100. The Malaysian Ringgit is currently at RM3.07 against the greenback as compared to RM3.00 a week ago.

There are no changes in the bearish trend characteristics for FBMKLCI. The short term 30-day moving average is currently at 1,480 points while the mid and long term 60 and 90 day moving averages is in a range between 1,525 and 1,532 points. The declining averages and location of FBMKLCI below these averages shows that there is no signs of any reversal. The Ichimoku Cloud continues to expand downwards and this shows stronger resistance in the near future. The moving averages and Ichimoku Cloud indicate strong resistance at 1,480 and 1,510 points level. Market may change its bearish direction only if the resistance levels are broken.

There also no signs of any change in trend in the momentum indicators. Although there were positive divergences in the momentum indicators against the FBMKLCI in the short term, the MACD, Momentum Oscillator and RSI were still unable to go above the middle levels and this indicates that the bears are still pretty much in control. The FBMKLCI continues to trade near the bottom band of the Bollinger Bands which means that the bearish pressure is starting again in the near term. The ADX indicator however, has not indicated any strong downtrend momentum.

The key support level for the FBMKLCI is at 1,420 points while key resistance level is between 1,480 and 1,510 points. The FBMKLCI just broke below the 1,450 points immediate support level and therefore, we are expecting the index to test the key support level in the near future, and possibly this week. Fundamentally, the rising US dollar is an indication that money is flowing back to the US and this is not a good indication for the Asian markets. From the chart, the US dollar is set to rally against the Malaysian Ringgit to the next resistance level at RM3.20.