FBM KLCI futures: Consolidation pressure remains

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) August contract on Bursa Malaysia Derivatives closed at 1,179.50 with an open interest of 20,702 contracts last week.

In the week before last, readers were alerted to the possibility of a technical consolidation in the index futures market ahead of a slowdown in trading momentum. The forecast was for the spot contract to adjust itself between 1,180 and 1,150 as the daily Moving Average Convergence Divergence indicator began to slow down. However, it gyrated between a high of 1,188 and a low of 1,158.5 as it trailed the underlying cash index.

The futures market closed at a 5-point discount to the cash index when trading ended last week.

After rangebound trading last week, some of the indicators are reversing their projected directions. As it begins to head south, the spot contract may find it even harder to stage an upward rebound to test the psychological 1,200 level this week.

The shorter-term forecast is now tainted as the commitment of the bullish trend may push it back to the 1,150 level as the daily Commodity Channel Index and the Relative Strength Index begin to weaken. Both these signals are now at the boundary of the overbought territory after being pressured late last Friday.

The medium-term oscillators' signals are largely unchanged. Even after the hook-down pattern found on the key daily indicators, the weekly signals remain largely unscathed within positive territory as they remain northbound. It is imperative for the spot contract to resist a changeover in the short term to keep the bullish pull in check.

Technical outlook
Tactically for this week, the consolidative elements are likely to remain. The tighter view will continue to favour a retreating momentum from its rising pattern found on the daily chart. This is likely to keep the bulls at bay with resistance staying within the 1,180 band and support at 1,150.

The Moving Average Convergence Divergence indicator remains positive with the faster below the signal line. Both lines at the positve region.

The daily Relative Strength Index closed at the overbought .

The daily Commodity Channel Index finished at the neutral.