On the 12th of March, the KLCI hit at intraday low of 836, and immediately rebounded the next day to close at 843. The 835 support level is holding, at least for now.
Source of the KLCI rebound : Strength of Dow
The rebound of the KLCI was triggered by the strength of the Dow Jones. From last Tuesday to Friday, the Dow has chalked up an impressive 4 days of consecutive gains of 10.3%. The impressive performance of the Dow was due to several factors namely : i) Possible changes to the US financial industry’s mark-to-market rules ; ii) Better than expected US February Retail Sales and iii) Positive news that General Motor’s cost cutting measures are working.
The rebound of the KLCI was triggered by the strength of the Dow Jones. From last Tuesday to Friday, the Dow has chalked up an impressive 4 days of consecutive gains of 10.3%. The impressive performance of the Dow was due to several factors namely : i) Possible changes to the US financial industry’s mark-to-market rules ; ii) Better than expected US February Retail Sales and iii) Positive news that General Motor’s cost cutting measures are working.
Is the KLCI out of the woods? No.
Are we out of the woods? Definitely not yet. Firstly, the volume of the KLCI rebound on Friday was unconvincing. Secondly, the KLCI-Dow correlation continues to dip to 0.628 from the previous 0.647. Thirdly, the KLCI is still bearishly below its short term, mid term and long term MAV line and also still drifting within a downtrend channel. The most positive picture that we can paint of the KLCI at this point is still a down trending KLCI, albeit with a cushioned downside, courtesy of the rallying Dow Jones.
Are we out of the woods? Definitely not yet. Firstly, the volume of the KLCI rebound on Friday was unconvincing. Secondly, the KLCI-Dow correlation continues to dip to 0.628 from the previous 0.647. Thirdly, the KLCI is still bearishly below its short term, mid term and long term MAV line and also still drifting within a downtrend channel. The most positive picture that we can paint of the KLCI at this point is still a down trending KLCI, albeit with a cushioned downside, courtesy of the rallying Dow Jones.
Strategy : Bearish KLCI maintained ; downside cushioned by Dow Jones
A cushioned downside means that the downwards movement of the KLCI is merely slowed by the Dow bulls. We need to see a more convincing increase in buying volume in the KLCI and for the KLCI to break more significant resistance levels such as its short term MAV.
A cushioned downside means that the downwards movement of the KLCI is merely slowed by the Dow bulls. We need to see a more convincing increase in buying volume in the KLCI and for the KLCI to break more significant resistance levels such as its short term MAV.
HAPPY INVESTING
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