Market decline on fear of European crisis escalating

As at 4.00pm local time, our FBM-KLCI dropped by 12 points to 1576. That put our index right on the previous high recorded in January this year. This should be a good support level and the next two support level would be the horizontal line at 1564 & the uptrend line at 1560. However, you should note that European markets dropped sharply on opening (by more than 2%) while Asian markets are also sharply lower (led by Hang Seng index which dropped by about 3%!). All these because of fear that Italy and Spain may be the next two countries in Europe to run into financial difficulties.


Chart 1: FBM-KLCI's daily chart as at July 12, 2011_4.00pm (Source: Quickcharts)

Meanwhile, I like to point out that the two indices that track our 2nd & 2rd liners performance- the FBMFLG & FBMSCAP- have both seen their 10-week SMA line cut below the 20-week SMA line today. We have discussed about how the 10-week SMA line cutting below the 20-week SMA line for these two indices earlier could be an early warning of a similar event for the main market barometer- FBM-KLCI and potentially a sign of a market top. Are we about to see that? Let's wait & see.


Chart 2: FBMSCAP's weekly chart as at July 12, 2011_4.00pm (Source: Quickcharts)



Chart 3: FBMFLG's weekly chart as at July 12, 2011_4.00pm (Source: Quickcharts)