Chart 1: FBM-KLCI's week chart as at June 4, 2010 (Source: Quickcharts)
Euro index broke its horizontal support at 121 last Friday. Let's take a quick look at EUR/USD chart below. We can see that EUR/USD broke below the horizontal support at 1.25 in late May. Its immediate horizontal support is at 1.17-1.18. If we assumed that EUR/USD is in a ABC corrective waves since July 2008 and these wave patterns take the zig-zag pattern, then the target for the completion of these waves (or, final Wave C) would be about 1.17-1.18. Let's wait & see whether this will pan out. For more on Elliot Waves, go here.
Chart 2: EUR/USD's daily chart as at June 4, 2010 (Source: Yahoo Finance)
The fresh weakness in EURO is again affecting global equity markets, including our FBM-KLCI. As noted above, it is critical that FBM-KLCI should not violate the 40-week SMA line (almost equivalent to the 200-day SMA line) & "horizontal line" supports at 1261 & 1240, respectively. A breakdown of both supports could signal the start of a downtrend for our market.
6 comments:
Dear Alex,
Good report , keep it coming...
It should serve as an eye opening report for some of your visitors,... so that they are aware the impact of Forex fluctuation on World's Equity /Stocks/Futures, including KLCI ....
Thanks.
Dear Alex,
I think the Euro/Usd may trade in a close range between 1.1800-1.2200 for sometimes partially due to consistent Intervention from ECB,,in order temporarily to buy some time to minimize the huge damage caused by PIIGS.
In view of the fact that there is some sign of slow recovery from US, Which may be the only Engine head(Partially with bullish China), the probability of the world heading to the extreme Bear Market status may be reduced considerably ,,And in addition to the recent firm Commitment from Germany to control her fiscal deficits so as to set as a good example to the rest of Euro Union Nations.
There may be a slower growth, (not negative)for the Euro Union as a Whole.(2010-2011)
So I predict our KLCI shall be stablilised near the 1300 level for a considerable time frame,, and it will not nose-dive below 800 points as predicted by some of our Local Analyst.
Thanks again.
Hi kyong,
I think asset classes are closely inter-linked and we would get a clearer big picture faster if we do, not only single-market analysis but also intermarket analysis. Investopedia has an interesting article on this subject (see link below). To wit:
"Single-market analysis is the study of one asset class or market in a single country. Intermarket analysis, on the other hand, is the study of multiple asset classes in a variety of markets in nations around the globe".
I have been studying the global equity markets & what struck me is how far ahead is the correction in Shanghai's SSEC index. Hang Seng has also corrected quite significantly. Why? Is it due to the monetary & regulatory tightening in China? Is it due to selloff by foreign funds based on the hypothesis that China is a bubble waiting to bust?
The communique issued at the end of the G20 weekend meeting made clear that we now live in a multi-speed world characterized by more than large differences in growth rates and a global economy that “continues to recover faster than anticipated.” There are also enormous differences in the soundness and sustainability of public finances in individual countries. I would think that Asian countries, led by China, are the one with faster growth rate plus sounder & more sustainable public finances. This is part of the legacy of the Asian Financial Crisis of 1998 from which all of us had learned our lessons. I believe that Asia will be a better place for equity investment & the current correction or bear market could well be a good buying opportunity.
http://www.investopedia.com/articles/technical/04/012104.asp
Dear Alex.
Your comments are commendable.
Yes, China is now inevitably the twine Engine head (Together with US)WHICH SHALL DRIVE the world out out of recession gradually..
The prompt cooling of the China Property markets and tightening of Liquidity in her financial system is critically essential to effect a not too hard landing.
The most important hard data this week are out of China and they will inevitably be parsed for signs of weakness, especially following last week’s – in our view largely seasonal – drop in China’s PMI.
I have the consistent often repeated view that the(broad basic balance) for the US remains weak and is why – even in the face of strong foreign inflows into Treasuries – we remain cautious about the USD outlook.
Yes,I agree with you that Asia Countries are more resilient and in a better positions as compared to Western Countries especially on the Equity Markets and other asset-based derivatives..
Thanks for your sharings...
Dear Alex,
I have an interesting report entitled "Preparing for a breakup of the Euro Union" by an Economic Analyst for Sharing via the following link:-
http://docs.google.com/fileview?id=0B74IMi--bRpKMzRlYmY2OTgtMDFiMi00NTJmL
Tk5YTAtNzkyNWJlZjRkNGNk&hl=en
Thanks....
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