Market Outlook as at May 28, 2009

Our market is currently experiencing some correction after making a high of 1060 yesterday. This high is just a tad shy of the overhead horizontal line resistance of 1065. The immediate horizontal line support is at 1038, which was the high achieved on May 7. A break below this level could bring forth more selling. As noted before, the 20-day SMA line has been supportive of the KLCI in the current rally & may do so again. That support for the 20-day SMA line is now at 1022.

While the short-term uptrend is still intact, two negative readings will be noted. Firstly, MACD (calculated based on 'weighted average' instead of the usual 'exponential average') has hooked down since April 21. Secondly, we have noted earlier that the rising index was accompanied by declining volume (cannot be seen in the chart below). These negative readings is a warning that we should be more cautious in this market which has risen nearly non-stop since the middle of March this year.


Chart 1: KLCI's daily chart as at 27/5/2009 (Source: Quickcharts)

The market may be correcting ahead of the mid-term 2-week school holiday that will begin on June 1. In the past, the first half of the school holiday tends to quieter than the second half. If the same holds true for the upcoming holiday, then we may see a dull market next week, to be followed by recovery thereafter.

More thoughts on the market...

On close-up, one can draw an accelerated uptrend line (S1S1) for the KLCI. This uptrend line will have support presently at 1030. A tentative uptrend line (SS) that stretches back to the start of the rally in mid-March will provided support at 970.


Chart 2: KLCI's daily chart as at 28/5/2009_12.30noon (Source: Quickcharts)