Interesting Week >>> Intense Economic week for US and Malaysia

Interesting Week : Intense Economic week for US and Malaysia

It has been a challenging last week for the KLCI. We knew that the Dow was descending
and will put downward pressure on the KLCI. But we stuck on to our positive view of
the KLCI as the 890 support was not broken. This week will be even more challenging, with a host of economic reports rocking the proverbial US as well as Malaysia boat.

Intense Economic Week
The critical economic reports that will rock the US market in the next few days are the Home Sales Report Wednesday night and the Durable Goods report on Thursday. The US GDP report will cap the week on Friday and will be the most critical and awaited data for the week. We will know how badly the US economy has regressed in Q4 by this Friday (Preliminary Estimates). Unfortunately, we will have to wait till after the weekend to react to the data as it will be released at night. The market expects a 5.4% dip in Preliminary GDP figures this Friday which is a downgrade of the actual Advanced estimates of 3.8% for Q4 (released in January).

In the local scene, Malaysia’s OPR will be released tomorrow, with economists expecting OPR to be maintained at 2.5%. Our Q408 GDP is due this Friday and economists expect moderating but still-positive growth of 1.4%, down from 4.7% in Q308. Look out for Malaysia’s critical Exports Economic data next Friday.

Dow Jones : RSI indicates bottom is near
Last Friday’s Dow provided some intense drama. Huge volume was underpinning the Dow down by as much as 216 points at one point, before the bulls reclaimed 116 points for a much higher negative close for the Dow. The next critical support for the Dow
would be the Oct 97 low of 7,161.15 (204 points away).

The Dow is now very oversold, as is expected when an economically intense week arrives. The main question is not whether the Dow is oversold, but whether how much oversold will it be before it decides to rebound. The Dow has now dipped below the 4% level in the 7-day RSI charts. During the Dow’s historic regression since 2007 till now, the Dow’s RSI level has only breached or come near this level 7 times. A bottom may be near and hopefully the 7,000 support level may trigger the formation of the bottom. KLCI : 890 still holding but expect much challenges ahead

We expect the KLCI to experience more downward pressure this week. However, we still maintain our positive status quo view of the KLCI as of now as the important 890 support is still holding. If the important 890 support can hold in this week’s trading climate where many economic reports will be released, it might be a good sign for the continuation of the KLCI’s positivity. We maintain our positive view on the KLCI.