Concerns materialised : Increased bearishness in VIX and Shanghai In addition, our concerns about the VIX Index rising after a brief plateau was realised. The VIX Index rose 14.9% to close above its 30-day MAV line which denotes an increased level of bearish activity. However, it is normal for the VIX to occasionally spike above its 30-day line. Sustaining the spike above the 30-day line is a different matter entirely as the VIX has recently failed numerous times to do so.The Shanghai Stock Exchange (SSE) also continued to plunge yesterday by 5.8% to close below its 30-day and 50-day MAV lines. Though the SSE is now oversold below the RSI 30% region, we expect it to be more oversold in the next 1-2 days and for a swift rebound to follow thereafter.
The market is “seemingly” under siege now, but we are still holding on to the bulls. Though we may have underestimated the current selling pressure, we are still holding on to our near term positive view of the market, as long as the KLCI does not regress more than 5% off our recent peak of 1,188.
KLCI : Low volume sellingThough the FBM-KLCI did decline 19.5 points yesterday, it was done amidst low selling volume. Low selling volume is a good sign that there is no panic selling in the market yet. After rallying 12% for the last one month, yesterday’s 1.6% correction can still be considered minor. Hence, we still maintain our positive near term view of the market.
Strategy : Maintain positive
We maintain our short term, mid term and long term positive view of the market. We advise traders to hold on to their positions. We will only turn bearish if the short term 30-day MAV line is violated. This 30-day MAV line now lies 26 points away at the 1,143 level.
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