Market Outlook as at April 16, 2009

Today, the KLCI closed with a doji, which could be a set up for a temporary top. For confirmation, we will have to wait for the market action tomorrow. In brief, a doji is a term found in Japanese Candlesticks charting when a security or index's open and close are virtually equal. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level (for more go here & here). For temporary top to be at hand (and, further correction ahead), tomorrow's market action must be very bearish, such as opening well below today's close & continue to trade lower. If such scenario occurred, then we would be able to sight anyone of these bearish reversal patterns (such as shooting star, evening star or bearish abandoned baby). For more, go here.


Chart 1: KLCI's daily chart as at 16/4/2009 (Source: Quickcharts)

To get a better feel of the market, let's look at the 120-minute chart of our KLCI. We can see that the KLCI's short-term uptrend picked up strongly after it had broken above the short-term downtrend, RR. The uptrend, SS accelerated to become S1S1. The later uptrend will be tested tomorrow and if this failed, the KLCI may slide back to find support at SS (at 900-920 level). Indicators such as MACD & ADX show the KLCI to be vulnerable.


Chart 2: KLCI's 120-min chart as at 16/4/2009 (Source: Quickcharts)

I believe the US markets also look vulnerable after its recent sharp rise. The shape of the 3 main indices (DJIA, S&P500 & Nasdaq) looks like an ascending wedge (also known as a bearish wedge). This pattern has the tendency to correct to the downside. In addition, you may notice that MACD histogram is also sliding lower, which may indicate that the uptrend is losing steam.


Chart 3: DJIA, S&P500 & Nasdaq's daily chart as at 15/4/2009 (Source: Stockcharts)