Market Outlook as at July 26, 2010

The market continued to recruit strength. This morning it broke above the strong horizontal resistance of 1350. FBM-KLCI gained 5.55 points to trade at 1351.23 as at 10.45am. If this upside breakout can sustain, FBM-KLCI could rally higher in the days ahead. Its next resistance will be at 1400.


Chart 1: FBM-KLCI's daily chart as at July 23, 2010 (Source: Tradesignum)

Globally, many stock markets have also shown similar rebound. The Shanghai's SSEC index has flashed a short-term uptrend (see Chart 2) and the DJIA is poised to do the same this week (see Chart 3).


Chart 2: SSEC's daily chart as at July 23, 2010 (Source: Stockcharts)


Chart 3: DJIA's daily chart as at July 23, 2010 (Source: Stockcharts)

With the upside breakout in FBM-KLCI, the earlier cautious market outlook has now turned bullish (provided FBM-KLCI stays above the breakout level of 1350). This price/index breakout should be given precedent over the bearish divergence in some indicators as well as in the volume.