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Monday, March 30, 2009

Market Commentaries/Technical Analysis March / April 2009

On the US market, the odds are improving in the US economy as the housing market there appears to be turning around. The US economy will likely be in bad shape in the first two quarters of 2009 but there is some hope now (March 2009).

The US government is working to get credit flowing into the market and when various schemes start to function, the credit market there will stabilize. That will be the lead for global market conditions to stabilize. Only then can recovery take place.

There is currently a bear market rally in the US, partly die to some positive signs of recovery following better than expected new home sales and orders for durable goods in Feb 2009 after a sharp fall in Jan 2009.
But its still too early to say. The underlying consumer demand is not really there yet. We have to look at more economic data in the next few months.
Domestically, with the end of the Umno general assembly meeting, the stock market could revert back to its normal lacklustre state in the week ahead due to the lack of catalyst and positive news flow. Also, investors are expected to cash in on gains from the market rebound that happened over the week.

Any rebound is expected to attract heavy selling pressure ahead, hence profit-taking correction is bound to happen. Counters that have performed well would see their prices coming down in the week ahead.

Unless daily trading volume improve further towards the one-billion shares mark, selling on rally is expected to dominate and restrict the upside of the local stock market.

Investors at large are expected to scurry back to the sidelines towards the start of the second quarter of the year (2009) as they wait for positive signs that will encourage them to put their money in the market.

Liquidity is ample but economic uncertainties are still lingering, despite the fact that the US government has recently released some encouraging economic data and the Chinese government optimistic remarks that its economy will be roaring back soon.

The 21.48 points rally over the week has improved the market’s technical landscape dramatically. The near-term technical outlook for the CI would turn firmly bullish once the 50-day MAV line or 885 points is violated cleanly.
The fact that the 835 point-level, which was previously tested twice but not broken – with a subsequent CI rally towards the 100-day MAV line – is a very positive technical development,

The immediate resistance at the 50-day moving average (MAV) line or 885 points, followed by the psychological level of 900 points. To the downside, an initial support at the 100-day MAV line or 858 points, followed by the crucial pivot support of the early December 2008 low of 835 points.

WARNING : Bad days ahead for contrarians

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