Stocks on Bursa Malaysia closed lower for the third consecutive day last Friday as market sentiment continued to sour pending the uncertainty on the US debt problem. The US debt crisis continued to weigh in on investors amid an easier regional market and a weak performance overnight on Wall Street. The FBM KLCI declined 3.1 points, or 0.2%, to 1,548.81 after opening 1.31 points higher at 1,553.22, and week-on-week, it lost 16.25 points from the previous week’s close of 1,565.06. Losers led gainers by 426 to 306 while 315 were unchanged. Volume increased to 1,107 billion shares worth RM1.716 billion compared with 1.06 billion shares valued at RM1.74 billion on Thursday. Weekly volume increased to 5.13 billion shares, worth RM8.07 billion, from 4.9 billion shares, valued at RM9.24 billion, last week.

The FBM KLCI opened 0.4 point better at 1,565.46 but fell 5.46 points to 1,559.60 on last Monday in line with the weak performance of regional bourses. The benchmark index rebounded to close 2.17 points higher to 1,561.77 on Tuesday on active buying of blue-chips, particularly finance and plantation, and in line with gains on regional markets. On Wednesday, the FBM KLCI pulled back 3.6 points to 1,558.17 on concerned over progress in the plan to lift the US debt ceiling. The key index fell another 6.26 points on Thursday to 1,551.91, and on Friday, the FBM KLCI slid for the third consecutive day to hit the intra-week low of 1,544.88 before rebounding to close the week off low at 1,548.81, losing another 3.1 points. 

On the weekly chart, the FBM KLCI formed a bearish black candlestick which indicates heavy selling pressure for the week and continuation of the downtrend for the third consecutive week. The key index had now closed below the 5 and 10-week moving averages (MA) and was resting on the 20-week MA which is currently at 1,548.54. A break below the 20-week MA is likely to see the FBM KLCI sliding lower to test the support of the 30-week MA which is currently at 1,541-point level. The 30-week MA support is critical as it has been providing important support at critical time to the benchmark index since the uptrend started in April, 2009. 

On the daily chart, the FBM KLCI formed a black hammer-like candlestick which indicates sellers were initially strong in hammering down the stock prices, but buyers later appeared to lend support to the key index. However, as the key index failed to close above the mid-point on last Friday, it indicates the buyers were still cautious in their support. Nonetheless, the support at 1,544-point level was seen as the key index rebounded when it hit the low of 1,544.88. As the bearish sentiment still prevail, the FBM KLCI is likely to extend its downtrend and consolidation. The critical support level to be watch is the 1,538-point level, which is where the 120 and 150-day MA meets. A break below this level is likely to see the FBM KLCI sliding lower to test the long term 200-day MA support at 1,529.

Weekly MACD has just made a dead-cross over its weekly signal line, issuing a sell signal on the weekly chart. Daily MACD continued to slide lower into the negative zone, indicating a pick up in the bearish momentum. Weekly RSI (14) is at 52.4, and has continued to slide lower into the neutral zone. Daily RSI (14) is lower at 36.4, which indicates the daily relative strength of the FBM KLCI is turning more bearish. Weekly Stochastic continued to slide lower to 62.7, indicating continued loss of weekly market strength and the continuation of the weekly down cycle. Daily Stochastic is at 11.7, indicating the daily market strength is very weak and the key index is short term oversold. Readings from the weekly and daily indicators showed that the FBM KLCI is currently very weak and bearish, and the downward momentum continued to dominate. Hence, the FBM KLCI is likely to extend its current consolidation process until a fresh catalyst emerges. 

The short term trend of the FBM KLCI remained down, and the medium term trend has also just turn bearish with the key index closing below the 60-day MA last Thursday. The long term trend is still up; however, it maybe subjected to test very soon. Immediate downside support zone is at 1,544 to 1,538, and the next lower critical support is at 1,525 provided by the pivot high formed on 14th January, 2008. The overall market is likely to continue with the consolidation process until there is a positive outcome on the US debt crisis.
Last Friday, the Dow fell -96.87 points or -0.79% to close at 12,143.24. This week, the FBM KLCI is likely to trade within a range of 1,520 to 1,586, and for today it is likely to trade within a range of 1,535 to 1,563.

This week's expected range: 1520 – 1586

Today’s expected range: 1535 – 1563

Resistance: 1554, 1558, 1563

Support: 1535, 1540, 1544