Market Outlook as at August 27

The KLCI has recovered back substantially after its recent sharp selloff, which saw the index testing its long-term uptrend line at the 1150 level (see Chart 1 below). Further recovery in the KLCI is possible, but the pace may be slower than that witnessed in the March-April period.

Chart 1: KLCI's weekly chart as at August 27 (courtesy of Quickcharts)

There is a possibility that the current re-bounce may take a short breather soon. From Chart 2 below, we have the daily chart of the KLCI overlaid with 3 moving averages. i.e. the 5-day SMA, 10-day SMA (with +2% displacement) and 10-day SMA (with -2% displacement). During the March-April re-bounce, the KLCI rallied off the low in 6 consecutive days & hit the 10-day SMA (with +2% displacement) before correcting down to the 10-day SMA (with -2% displacement). The present re-bounce did hit a high of 1292 yesterday [which is marginally above the 10-day SMA (with +2% displacement)]. If the market were to soften a bit ahead of the long weekend (which includes a Friday holiday for Independence Day), there is a good chance that it may pull back to the 1240 level [ which is the 10-day SMA (with -2% displacement)]. If this were to happen, you should use to opportunity to add to your position.


Chart 2: KLCI's daily chart as at August 27 (courtesy of Quickcharts)