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TwitterThe national budget will be announced a day after this article is written and I think that even if there are goodies for the equity market, the effect may be minimum. Investors are more concerned about the global economy. It’s just quite difficult to be optimistic at the moment and the market volatility just scares off investors. US Dollars and treasuries continue to rise after a pullback in the past two weeks and gold price started to rebound this week. All these indicate that confidence in the equity market is getting much weaker.
The third quarter of this year ended in a strong bearish note and has wiped out all gains in the previous three quarters. Markets would have ended up in heavy losses for the past one week but strong rebound on Wednesday recovered the losses. The Dow Jones Industrial Average shed only 30.65 points in a week to 11,123.33 points after rebounding from a 12 month’s low. London’s FTSE 100 index rose 94.42 points to 5,291.26 points and France’s CAC40 index increased 47.70 points to 3,075.37 points. Asian markets are still in red. Hong Kong’s Hang Seng index is still down 4.6% in a week at 17,172.28 points Thursday. Japan’s Nikkei 225 declined 0.8% to 8,624.93 points and Singapore’s Straits Times Index is down 3.9% at 2,603.12 points.
The renewed fear in the market prompted gold price to rebound from US$1,600 two weeks ago to US$1,651.80 an ounce on COMEX. Price of gold was at US$1,900 in early September. Crude oil was volatile last week. The Light sweet crude oil in NYMEX fell from US$83 an ounce two weeks ago to a low of US$76.40 early last week before rebounding to US$82.55 on Thursday. The weak economic indicators also pressured crude palm oil price and this commodity declined 3.1% in a week to RM2,808 per metric ton on Bursa Malaysia. As the US Dollar continues to strengthened, it pulled back sharply on Tuesday. In a week, the Ringgit was slightly up against the green back from RM3.177 to RM3.169 against a dollar.
The FBMKLCI continues to stay in the down trend by maintaining below the short to long term moving averages. The FBMKLCI has not even managed to climb towards its short term 30 day average before pulling back. The short term 30-day moving average is currently at 1,420 points and therefore the index is still considered in a short term down trend despite the strong rebound. The longer term 60 and 90-day moving averages range between 1,470 and 1,500 points. The rebound is not strong enough to change the characteristics of the down trend. The Ichimoku cloud continues to decline and expand downwards. The indicator continues to indicate a strong bearish market.
Momentum indicators also indicate that the bears are still in control despite the rebound last week. RSI, MACD, and Momentum Oscillators are still below the middle levels. The FBMKLCI is still trading below the middle band of the Bollinger Bands and this indicator is still declining. There are no signs of the bearish momentum slowing down.
The broken key support level of 1,420 remains as the current resistance level. The current rebound may just be a technical rebound of a bearish down trend if the index is unable to break above this resistance level. Immediate resistance level is at 1,400 points. Optimism may start to develop only is these resistance levels are broken. In the intermediate term, more downside is expected with a technical target of 1,200 points. I am not too optimistic yet on the market until there are clearly signs both fundamentally and technically. If the FBMKLCI falls below the support level of 1,350 points again, then we may expect more blood in the streets.
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