KLCI to stage bear market rally

The sharp rally in US stocks last Friday, with the Dow Jones Industrial Average surging nearly 500 points or 6.5 per cent to close above 8,000, should filter through and shore up stock markets in the region and locally early this week. Nonetheless, while the latest bear market rally can be rather strong, we expect downside volatility to stay high in the US as more bad economic news emerge. On the local front, as hopes increase that Bank Negara could cut its key interest rate this week, any downside should be cushioned.


On the KLCI, immediate resistance upon a rally today is expected at 888, which represents the 23.6 per cent Fibonacci Retracement (FR) of the downfall from the pivot high of 1,164 on July 31 to the pivot low of 801 on October 28, with next immediate resistance seen at the psychological 900 level. The 920 level, which represents the 61.8 per cent FR of the upswing from 548 low of April 2001 to the all-time high of 1,525 January this year, will act as a formidable upside hurdle. On the downside, expect 849, the 61.8 per cent FR of the bear market rally from the 801 pivot low to the 926 high to cushion immediate downside, with the 76.4 per cent FR at 830 to provide a more sustainable support platform.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.