Market Outlook as at October 13, 2008

On the back of strong rebound in many oversea markets, local investors are now beginning to get back into the stock market. Their main concern remained: Has the market bottomed? Would the recent low of 926 be surpassed in the next selldown? I believe that the market is likely to undergo a protracted bottoming process, lasting many months. While a V-spike reversal is possible, the market rally that followed may not have sustaining power.

In the current rebound, the KLCI will face resistance at the psychological 1000 level and at the 1030 level (posted by the immediate downtrend line). If the KLCI can break above the downtrend line, then the market could either move in a sideway manner or commence a new uptrend. While most investors would prefer an uptrending market, a sideway market is still acceptable. This sideway market would fit into a bottoming process, allowing investors to accumulate stocks before the next bullish phase of the market.


Chart: KLCI's daily chart as at October 13, 2008 (source: Quickcharts)