Market's upside move hanging by a thread

Our market's upside move, which has never been very impressive in the best of times, might have taken a fatal blow. The current move- in the shape of a bearish wedge- was inching toward its recent high of 1305, recorded on April 29th. However, the market did not take too kindly to the fresh political uncertainties brought on the weekend news of Dr. M's resignation from UMNO.

From the chart, we can see that the KLCI has just broken below the wedge yesterday. This morning, the KLCI dropped more than 8 points to hit a low of 1279, before recovering. The drop could be attributable to DOW's overnight drop of 199 points. As at 11.30 am, the KLCI is up about 1 point at 1288. Losers outnumbered gainers 298 to 155.

If the KLCI could recover above the 1300 level over the next day or two, the current market upleg may be intact. On the other hand, if the KLCI were to drop below 1271, the low recorded on May 5th, then a new short-term downtrend could have set in. The market is now at a crossroad.


Chart: KLCI's daily chart as at May 20, 2008 (source: Quickcharts)