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.

Subsidy saving and FBM KLCI

According to BofA Merrill Lynch Fund Manager’s survey, Malaysia and Taiwan was the two least preferred market in the global emerging stock market. Indonesia with an expected GDP growth of 6% in 2010 is the third most preferred emerging market.

Despite unfavorable view among the global fund managers, the local bourse has registered impressive gains. The medium term bullish local bourse as shown last week was not followed by increasing volume and the ringgit movement is not reflected by the stock market moves. It seem that the current equity market is being supported by local fund managers especially the government sponsored funds such as EPF and Khazanah.

With PM Najib striving for major projects to push the economy, a depressed ringgit will boost FDI and also the local stock market. It was being said that the recent price hike of fuel and sugar will save some funds to the government and the fund will be used to finance one his major project.

Tengku Razaleigh did stated this week that there is no check and balance in Najib administration, therefore financial irregularities such that has happened in FELDA and Sime Darby occurred occasionally. Giving that scenario, I am expecting some leakage from the subsidy saving by hiking the fuel and sugar price .

The local bourse as represented by FBM KLCi showed a 7 days upward moves before registering a loss on Thursday. The Index rebound slightly on Friday.

With a potent move in two weeks that carried the Index passed the previous high of 1335 and a golden cross between the 20 and 50 EMAs, the immediate trend is a continuation bullish tone.

Stochastic Indicator is at o/B position and MACD at positive position and above the trigger line. This week I am looking for a correction in the local burse with major support at 1317.

FBM KLCI week 12 July

With MACD at above positive position and MACD barely crossing the trigger line and stoch cross over 20, the local market could see a continuation of bullish tone. Support is at 1306.9 and any break at this level will carry the index past the previous low. Resistance is at 1339.6 with a break away from this level will confirm the bullish continuation.

MACD - Histogram:

MACD Histogram telah dibangunkan oleh Thomas Aspray pada tahun 1986. Dia membangunkan MACD Histogram bertujuan untuk mengatasi MACD yang biasanya memberi petunjuk jualan atau belian yang agak lambat. MACD Histogram mampu memberi isyarat lebih awal dengan membuat jangkaan bila Garisan MACD akan melepasi Garisan Isyarat MACD.

Definasi MACD-Histogram

MACD-Histogram merupakan perbezaan antara Garisan MACD dan Garis Isyarat MACD. Perbezaan ini dibentuk sebagai turus seperti di dalam Rajah 1. Pembinaan turus itu dipanggil MACD-Histogram.

Histogram membuat lintasan garisan tengah dan "divergence" mudah dikenalpasti. Dalam Gambar 1, Histogram membuat lintasan garisan tengah bila apabila MACD melintasi Garisan Isyarat.

Jika nilai MACD lebih besar dari nilai 9EMA MACD (Isyarat MACD), maka nilai MACD Histogram adalah positif. Sebaliknya, jika nilai MACD lebih rendah dari 9EMA MACD, maka nilai MACD Histogram adalah negatif.

Jika turus menjadi lebih panjang atau besar, ini menunjukan perbezaan antara MACD dan Isyarat MACD meningkat dan sebaliknya.

Turus yang membesar menunjukan momentum menigkat.

MACD Histogram direka untuk mengesan lebih awal bila purata bergerak melintasi MACD. Ini boleh terjadi dengan melihat divergence positif dan negatif MACD Histogram;

• Divergence positif terjadi bila MACD histogram membentuk turus yang rendah terus meninggi dan MACD bergerak seterusnya merendah.
• Divergence negatif terjadi bila MACD histogram membentuk turus yang tinggi merendah dan MACD bergerak seterusnya meninggi.

Rajah 1

Sila lihat Rajah 2 untuk memahami divergence positif dan negatif.

Dari posisi X, MACD bergerak seterusnya meninggi tetapi histogram mulalai menurun (divergence negatif). Ini menandakan bahawa harga setelah bergerak meninggi akan berubah untuk bergerak menurun. Lintasan MACD sebenarnya berlaku di posisi Y dimana kita mendapat petunjuk untuk membuat posisi jualan, tetapi Histogram memberi isyarat lebih awal di posisi X.

Begitu juga di posisi P dimana MACD bergerak seterusnya kebawah tetapi Histogram mula bergerak ke atas(divergence positif). Ini menandakan pergerakan situasi bull telah berlaku dan harga akan menuruti kemudiannya. Lintasan MACD sebenarnya terjadi di posisi Q.

Divergence antara MACD dan MACD-Histogram adalah petunjuk utama yang digunakan untuk menjangkakan bila lintasan purata bergerak akan berlaku. Divergence positif untuk MACD Histogram menunjukan MACD semakin kukuh dan berkemungkinan lintasan purata bergerak situasi bull akan berlaku. Divergence negative untuk MACD Histogram menunjukan MACD semakin lemah dan berkemungkinan lintasan purata bergerak situasi bear akan terjadi.

Rajah 2

Nota:

MACD Histogram dibina dari satu indikator atau direka untuk menunjukan pergerakan satu indikator yang lain iaitu MACD. Ini memungkinkan MACD Histogram akan memberikan isyarat palsu lebih kerap kerana tidak ia tidak secara langsung terikat dengan tindakan harga.