KLCI to re-test the 1215/20 level

On the back of a strong rebound on Wall Street overnight (see Chart 2 below), our KLCI should re-test its resistance at the 1215/20 level today (see Chart 1 below). My feeling is that the KLCI is likely to break above this resistance. If this attempt is successful, the KLCI's next resistance will be at the 1250 level. Support for the market can be seen at the psychological level of 1200, the 50-day SMA of 1190 & the immediate uptrend line support of 1155/60.


Chart 1: KLCI's daily chart as at March 21, 2007



Chart 2: S&P500's daily chart as at March 21, 2007

The S&P500 has broken below its medium-term uptrend line during the recent correction. The past few days' rally is driven by positive news, such as the neutral bias adopted by the FOMC overnight as well as positive technical development. In the latter category, the most important is the successful test of the lows whereby the market came to its recent low on March 5 and rebounded off that low. Since yesterday's close has breached the overhead resistance formed by the recent reaction peaks (marked in pink), I believe that the current rally in the US market may be more than a mere technical rebound. Nevertheless, I must emphasize again that the medium-term uptrend line has broken and the way forward for the US market will be quite tricky.