Market Outlook as at March 6

The KLCI has tested its 100-day SMA at 1097 level yesterday, before rebounding to close at 1111. It is a testimonial to the sharpness of this fall that the KLCI has reached this important mark in a matter of 6 days after making a top. With the RSI deeply into the oversold zone, the stage is set for a technical rebounce in the market. You would also notice that the uptrend line starting from July 2006 may provide some support at the 1075/80 level (see Chart 1 below).

I have also attached the charts for the 12-month period ended March 5, 2007 (Chart 2) as well as the 12-month period ended March 5, 1994 (Chart 3). A comparison between the 2 charts raises the interesting question of whether we are currently in a similar stage like January 1994, where the market had corrected sharply after the 1993 bull run and thereafter entered into a period of consolidation that lasted many months. During that period, the market traded in a range marked out by the 50-day SMA and 100-day SMA (or, between 1000 and 1150 level). If the same pattern were to repeat, we can expect a market to trade in the range between 1100 and 1200 for the next few months. You may take advantage of the range-bound market to accumulate near the 1100 level & to sell when it approaches the 1200 level.



Chart 1: KLCI's daily chart as at Mar 5



Chart 2: KLCI's daily chart for 12 months ending Mar 5, 2007



Chart 3: KLCI's daily chart for 12 months ending Mar 5, 1994