Market Outlook as at May 18, 2009

The KLCI rebounded off its 20-day SMA support at 1000-point level yesterday. With the MACD hooking down & the -DMI crossing above the +DMI, I believe that the present rally has lost sufficient momentum to warrant some caution. Will a strong rally be able to reverse the negative reading of the aforesaid indicators? We have to wait & see.

My main concern is that second & third-liner stocks could come under steady selling due to the large number of players caught in the past few weeks of sharp rally. These stale bulls would cap the rise of the price of second & third-liner stocks in the days ahead.

Based on the above, one should be very cautious when buying second & third-liner stocks. If possible, we should select better quality stocks & execute our buying at a steady pace.


Chart: KLCI's daily chart as at 18/5/2009 (Source: Tradesignum.com)

PS- I'd rushed to post this piece earlier. A slight amendment was subsequently made which does not change its essence radically.