Share prices on Bursa Malaysia was on bullish path amid of downturn in global equity market(refer here). Despite the high index level, the overall daily traded volume remained low. It is widely belief that current market participations are local institutions and a few of day traders, not many retail and foreign investors. In other words, current institutional investors consist of such government link funds…EPF, PNB, Khazanah, Tabung Haji.

How long can they last. I believe if there is no major setback in US and European markets, the locally driven equity market will not be inflicted.

With FBM KLCI going for 1450, last Friday high at 1415.28 is at 1.618 fibo extension of previous swing high to low in May. Therefore possibility of price correction.

FBM KLCI correction

A strong ringgit performance on Monday was reflected by a strong moved upward in the local stock market with the benchmark FBM KLCI rose for the seventh consecutive days to close 2.68 points or 0.20% higher at 1363.60, after touching the intra-day high of 1368.43.

By the end of the week, FBM KLCI close lower to 1360.45 despite a robust Ringgit against the US Dollar.

The index has been slowly falling from its high despite Ringgit strengthening as indicators indicating an overbought situation. The market correction is expected to continue in early of this week as the current three days correction is still very shallow if we compared with the previous corrections.

Expecting the index to push downward to 1353.90. Resistance is at 1365.85.

The chart below is the derivative of FBM KLCI i.e. the Index Future contract- FKLI.

The last day of the week, it registered a bearish candle with close at 1363.00 and a low of 1362.5. As the FBM KLCI is expected to be bearish, the derivative will follow it. Set a sell below 1362.00 .

In US and Europe, most of the fundamental weaknesses behind the downtrend in risk assets in the first half of 2010 have not materially improved. The signs of a genuine recovery remain shaky – jobs, spending, real estate, construction and banking, longer term resolution of the sovereign and private debt levels all remain weaker than we would expect in the early stages of a real recovery.

In the local news, FDI issue was the centre of attention among the politicians and economists. The World Foreign Investment Report (WIR) 2010 released by the United Nations showed that FDI in Malaysia plunged 81 per cent last year, trailing behind countries like the Philippines, Vietnam, Thailand, Indonesia and Singapore. This is the second data that showed that we have fall behind Singapore

With ringgit on the uptrend, the local stock market managed to register a strong moved upward with a price gap early of the week. FBMKLCI was on the uptrend for six straight days and making a new high for the year.

At current level the indicators are showing signed of overbought and a correction in the near future is expected. The FBM KLCI has been tacking the upper Bollinger Band and has a great positive difference with 20 SMA.

Last week with the Index closing at 1360.92, my 161.8% fibo retracement target was achieved. Any price correction could be determined after a bear candle is formed. Next week. I am expecting FBM KLCI to move in the range between resistance level at 1365.85 and support at 1353.15.