Market Outlook as at January 27, 2010

Our market did some catching up to the downside this morning, with a sharp fall of 18 points to an intra-day low of 1265 (as at 9.50 am). This compared unfavorably to other regional markets, which either went up slightly or down only marginally (except for the Australian All-Ordinaries). The main reason for the disproportionately larger fall is because of our earlier smaller decline. From the table below, we can see that most major indices had dropped to & are presently holding onto their 100-day SMA, while our market is still more than 3% away from the 100-day SMA line. If we were to follow other markets in the current selldown, then the FBM-KLCI may test its 100-day SMA line at 1244 (see Chart 1 below).


Table: Major indices closing level & their 100-day SMA as at Jan 26, 2010


Chart 1: FBM-KLCI's daily chart as at Jan 27, 2010_10.15am (Source: Quickcharts)

A closer study of the weekly chart of our FBM-KLCI will show that a failure to surpass the 1280-1330 level can lead to very sharp drops- be it a bear market or otherwise. The next strong horizontal support are at 1200 & thereafter 1150. Can it go down so much? It is hard to believe that we have to ponder such a distance shore after reaching the dizzy height of 1308 just three trading days ago.


Chart 2: FBM-KLCI's weekly chart as at 26/1/2010 (Source: Tradesignum)

If a quick recovery does not come within the next few days, I am afraid we can conclude that the bull rally of 2009 has ended. If you need a confirmation, then look out for a breakdown of the 100-day SMA line. In which case, it would be advisable to reduce our long position as prices would likely to continue to drift lower for many weeks or months ahead.