Malaysia Market Outlook

The tumble in US stocks last Friday, pressured by a record slump in retail sales and the forecast by top seller of mobile phones Nokia Oyj which predicted that global shipments will shrink significantly next year, should filter through to dampen sentiment on the local stock market this week. As such, investors should continue to be cautious and adopt a "buy on dips and sell on rallies" strategy, as global financial markets will suffer extremely volatile trading given uncertainties over the depth and length of a global recession going into next year. Sector-wise, however, while blue chips are expected to remain weak on low volume, momentum trades should dominate in lower liner penny stocks and continue to highlight active retail participation in coming weeks.


Given the failure of the KLCI to close above 888 last Friday, a re-test of the previous Friday's low of 869 is imminent early this week, with a breakdown to accelerate any fall towards the stronger support at 849, mirroring the 61.8 per cent Fibonacci Retracement (FR) of the bear market rally from the 801 pivot low of October 28 to the 926 high. On the upside, resistance is revised lower to 888, with next immediate resistance 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 in January this year, should act as a formidable hurdle. The next upside hurdle is seen at 940, representing the 38.2 per cent FR of the downswing from 1,164 high of July 3 to the recent October 28 pivot low of 801.

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