Market Outlook as at February 9, 2007

The market action yesterday shows sign of distribution. Distribution is normally deemed to have occurred when there is a significant increase in the volume of shares traded but the main index remained relatively unchanged or made little gains or losses.

The increased volume happens when there is an influx of new buyers, which enable the existing holders of shares to sell their shares at acceptable prices. In a very bullish market, distribution can be absorbed & the market may re-gain its prior momentum after a minor correction (or, sometime without any correction). The critical thing to consider is who are the new buyers and whether the buying can continue? Are the buyers foreign funds? What kind of foreign funds? Or, are they retail players who finally got excited after watching UEM World did a Hail Mary pass? And, lastly, we must remember that frequently when the buying stops, the selling will begin.


Chart: CI's daily chart as at Feb 8

Note: Yesterday, the CI did gain 5.26 points to close at 1248.83. The gain happened in the last 15 minutes of trading when buying of selective blue chips pushed up the index.