Market Outlook as at May 2, 2008

Last Friday, our KLCI was the sole loser among Asian markets. Most regional markets registered healthy gains (ranging from 0.49% for TWII to 2.81% for STI), while ours was down 8.38 points (or, 0.65%) to close at 1271.48.

We can see that the KLCI did not experience a sustained increase in volume after the breakout to the upside of its medium-term downtrend on April 17th. While volume did increase above the 800 million units on April 23rd & 24th, the volume did not sustain. The rebound from the low in early March is in the pattern of a rising wedge. This wedge is also called a bearish wedge because it tends to breakdown (or, breakout to the downside). As at last Friday, the KLCI has done just that, albeit only marginally. A quick recovery must follow on Monday, or else KLCI could test the lower level such as the horizontal supports of 1250 and 1216. If the latter were to happen, our market would likely to be a range-bound market for the next few weeks (or, months), trading between 1200 & 1300.


Chart: KLCI's daily chart as at May 2, 2008 (courtesy of Quickcharts)