KLCI may face more downward pressure
MAIN BOARD
THE KL Composite Index (KLCI) finished the week with sharp losses on renewed selling in all main index-linked stocks as well as the bearish sentiment influenced by the declining US and Asian markets.
Concerns over a US recession and the bearish impact it would have on markets worldwide are becoming real. Recent comments by the world's richest man, Warren Buffett, that the United States is already in a recession and his uneasy feeling as to how long it would last have generated some uneasiness among large hedge funds.
The KLCI fell from a week's high of 1,344.46 to a low of 1,277.69 points and finished the week sharply lower at 1,296.33, down a hefty 61.07 points or 4.50% from the week before.
All the top 10 index-linked stocks settled the week with large losses.
Volume for the week eased slightly to 1.169 billion from 1.222 billion shares the week before. The daily average volume fell to 233.9 million from 224.5 million shares.
In last week's column, I mentioned that a vital chart support stands at 1,350-1,330 points and, in the event of a successful break below these support levels, the index would trend lower and test its six-month lows at around 1,300-1,280. This has come to pass and we have the index closing the week at the mid-range of this minor support base.
I expect the index to make an early downward break from here this week and head south to initially test the 1,250-1,230 levels. My technical outlook would turn very bearish if the index fails to hold at these levels. My minor chart base is now adjusted lower to the 1,200-1,180 levels.
Technically, I am bearish in my near-term outlook and would look to any intermittent bullish rally to sell just as over the past couple of months most people took the opportunity to buy on any dips.
The overhead resistance for the immediate term is now pegged at 1,300-1,315.
The daily technical indicators closed the week mostly negative and called for more downward pressure for the immediate term.
The daily stochastic triggered the sell signal on March 6 and suggested the index was in a bearish extended-move phase. The oscillators per cent K and D closed lower at 16.83% and 9.91% respectively.
The daily Money Flow Index (MFI) ended slightly higher at 19.12 points and showed light accumulation occurred last week.
The main trend-tracker, the 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines), gave the bearish divergence signal on Jan 25 and continued to show the main trend was bearish.
The 3- and 7-day ESA-lines, remained in bearish divergence and indicated the bearish cycle would continue this week.
The 5-day Relative Strength Index (RSI) settled higher at 24.85 points. Analysis of the RSI shows the index was now out of its oversold position.
URL:
http://biz.thestar.com.my/news/story.asp?f...07&sec=business 
Mar 10 2008, 10:55 AM
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