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Monday, June 28, 2010


Two-Week DJIA Bull Run Comes to Screeching Halt
The previous week's upward momentum collapsed in a heap this week, with the three major market indexes suffering substantial losses. The Dow Jones Industrial Average (DJIA) lost 2.8%, while the S&P 500 Index (SPX) dropped 3.6%, and the Nasdaq Composite (COMP) shed 3.8%.
Overall, the Dow completed a technical pattern known as an "outside week" last week. For the record, an outside week occurs when the market hits a higher high and a lower low than it did in the week prior. Typically, technical analysts view this development as an indication that the market is about to move in the direction of the close - i.e., a low close would indicate a lower move in the market, while a higher close would indicate a rally.

The S&P 500 Index (SPX) initially gapped significantly higher on Monday morning, trading as high as 1,130 right after the opening bell. But by mid-afternoon it found itself trading back below the important 1,125 area, which is the site of its 160-day moving average, a trendline that acted as support at the February 2010 bottom. After the gap higher on Monday, sellers dominated the price action, with the SPX falling roughly 5% from Monday's high to Friday morning's lows.

THE FTSE Bursa Malaysia Composite Index (FBM KLCI) resumed its r technical rebound following last week's sideways consolidation. It stayed above its psychological resistance of 1,300 points when it closed at 1,317.69 last Friday.
On Bursa Malaysia, the FBM KLCI recorded a week-on-week gain of 23.02 points, or 1.78 %.
The following are the readings of some of the FBM KLCI's technical indicators:

Moving Averages: The FBM KLCI continued to stay below its all its 10-, 20-, 30-, 50-, 100- and 200-day moving averages.

Momentum Index: Its short-term momentum index continued to stay above the support of its neutral reference line yesterday.

On Balance Volume: Its short-term OBV trend continued to stay above the support of its 10-day exponential moving averages.

Relative Strength Index: Its 14-day RSI stood at the 60.35 per cent level yesterday.

The FBM KLCI's technical pullback on Monday hit its intra-day low of 1,294.60, staying marginally above this column's envisaged support zone (1,257 to 1,291).

The benchmark index hit its intra-week high of 1,317.69 last Friday, moving into confines of this column's envisaged resistance zone (1,298 to 1,332).

Of the FBM KLCI's 30 component stocks, gainers overwhelmed losers by 29 to 1. Tanjong, TNB, DiGi, and PPB's combined gains of 52 sen, 47 sen, 44 sen and 40 sen accounted for the FBM KLCI's week-on-week gain of 23.02 points, or 1.78 per cent.

The FBM KLCI's weekly chart staged a technical breakout of its immediate overhead resistance (See FBM KLCI's weekly chart A3:A4) at the market close yesterday. Also, it continued to stay below the support of its intermediate-term uptrend (A5:A6).

Chartwise, the FBM KLCI's daily trend staged a technical breakout of its short-term downtrend (See FBM KLCI's daily chart B3:B4) at the market close yesterday. It continued to stay below its intermediate-term uptrend (B1:B2).

The FBM KLCI's daily and monthly fast MACDs (Moving Average Convergence Divergence indicators) continued to stay above their respective slow MACDs yesterday. Its weekly fast MACD continued to stay below its weekly slow MACD.

The FBM KLCI's 14-day RSI stayed at the 60.35 per cent level yesterday. Its 14-week and 14-month Relative Strenth Index stayed at the 57.31 and 63.09 per cent levels respectively.
Following the decisive breach of its overhead resistance of 1,300, the FBM KLCI has since regained its market momentum. It will stage an attempt in trying to overcome its immediate resistance of 1,326.
A decisive breach of 1,326 is likely to see the FBM KLCI staging a full recovery to its previous resistance high of 1,349.71 posted on May 4.Market sentiment on the local bourse is likely to remain firm with heavyweight index-linked counters providing the critical support while allowing selective second liners to play catch-up.

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