Shared by: CK KOK, Remisier, Futures Brokers’ Rep, Kenanga Investment Bank; KL
Beyond the near-term euphoria, it had its qualms on whether the worst of the global equities selloff and world economic recession had actually been left behind.
Despite keeping its medium-term bearish opinion, the ongoing market force will present opportunities for investors to engage in trading plays and/or sell on strength.
Most remained pessimistic about the equities markets and would rather wait for firmer economic data to emerge before they are willing to declare that the worst was over for the global economy, and by extension, the Malaysian market.
The equity markets traditionally react six to nine months ahead of the bottoming of the real economy.
The KLCI’s upward trend was expected to extend in the short run following its convincing breakout from a plunging trend line. Its climb may be guided by an intermediate upward sloping channel, whereby a shift beyond the first resistance level of 930 will probably push the KLCI to go past its recent high of 936.63 toward the next resistance target of 970.
Nonetheless after rising three weeks in a row for a cumulative gain of 63.6-points or 7.5%, would likely pause for a breather initially.
Nonetheless after rising three weeks in a row for a cumulative gain of 63.6-points or 7.5%, would likely pause for a breather initially.
The near-term positive outlook will be viewed as technically intact provided that the KLCI does not sink below the resistance-turned-support line of 890 during the consolidation process.
Since the KLCI reached a peak of 1,524.69 in mid-January 2008 before slipping subsequently into a major downward trend to touch a bottom of 801.27 in late October 2008, there had been three significant counter-trend rallies (as measured by a jump of at least 10% in the KLCI from trough to peak).
They are a 13% climb between March 10, 2008 and end-April 2008 (in a space of seven weeks); a 16% increase from late October 2008 until early Nov 2008 (or over one week); and a rise of 12% in about four weeks that stretched between Dec 9, 2008 and Jan 7, 2009.
The KLCI had recovered as much as 9% in about three weeks (up from a low of 836.51 on March 2009) so far. Hence, it appears the market gauge still has more legs to run in terms of short-term upside potential and ‘time available’ for the rebound momentum to carry on.
To cast off investors’ scepticism that this is just a bear market rally, its recent history suggests the KLCI would have to go up by more than 16% from the trough (of 836.51 on March 12 2009).
On the chart, this would translate to a hypothetical index target of 970, or 7% above where it is today (07th April 2009). At that level, it would exceed marginally a positive return of 20% (which is the technical definition for bull market) from the bear market bottom of 801.27.
For the week or weeks ahead, the Malaysian bourse would “probably continue to dance in tune with the regional themes”. On another front, the selection of a new cabinet team — likely to be made as early as tomorrow — will be watched for possible implications on (existing and new) government policies and plans particularly in the key ministries.
At end-March 2009, the KLCI had seen a downward trend stretching five quarters, close to the 1997/98 Asian crisis stretch that lasted 5½ quarters.
Since the KLCI reached a peak of 1,524.69 in mid-January 2008 before slipping subsequently into a major downward trend to touch a bottom of 801.27 in late October 2008, there had been three significant counter-trend rallies (as measured by a jump of at least 10% in the KLCI from trough to peak).
They are a 13% climb between March 10, 2008 and end-April 2008 (in a space of seven weeks); a 16% increase from late October 2008 until early Nov 2008 (or over one week); and a rise of 12% in about four weeks that stretched between Dec 9, 2008 and Jan 7, 2009.
The KLCI had recovered as much as 9% in about three weeks (up from a low of 836.51 on March 2009) so far. Hence, it appears the market gauge still has more legs to run in terms of short-term upside potential and ‘time available’ for the rebound momentum to carry on.
To cast off investors’ scepticism that this is just a bear market rally, its recent history suggests the KLCI would have to go up by more than 16% from the trough (of 836.51 on March 12 2009).
On the chart, this would translate to a hypothetical index target of 970, or 7% above where it is today (07th April 2009). At that level, it would exceed marginally a positive return of 20% (which is the technical definition for bull market) from the bear market bottom of 801.27.
For the week or weeks ahead, the Malaysian bourse would “probably continue to dance in tune with the regional themes”. On another front, the selection of a new cabinet team — likely to be made as early as tomorrow — will be watched for possible implications on (existing and new) government policies and plans particularly in the key ministries.
At end-March 2009, the KLCI had seen a downward trend stretching five quarters, close to the 1997/98 Asian crisis stretch that lasted 5½ quarters.
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