Market Outlook as at July 20, 2011

I have attached below three charts (FBMFLG, FBMScap & FBM-KLCI) in the order of the weakest to the strongest. On all three charts, I have plotted two vertical lines- one for Dec 21, 2007 & another for Mar 21, 2008. During that interval, we saw all three indices chalked up the following:

1) the 10-week SMA line crossed below the 20-week SMA line; and
2) the index subsequently went below the 40-week SMA line.

You will notice that these two events happened earlier for the weakest index (FBMFLG) as compared to the strongest index (FBM-KLCI). In addition, you would notice that all indices would struggle to hang on to the 40-week SMA line after the 10-week SMA line had crossed below the 20-week SMA line.

If we look at all three indices today, we would see that the 10-week SMA line had crossed below the 20-week SMA line for both FBMFLG & FBMSCap, while the 10-week SMA line is still above the 20-week SMA line for FBM-KLCI. Now, both FBMFLG & FBMSCap are struggling to stay above their respective 40-week SMA line. Finally, you would notice that the indicators are all pointing downward. MACD is very near to the zero line. As for the ADX indicator, the -DMI is hooking up while +DMI is dropping fast.

All in all, the technical outlook for the market is poor. While we do not have a confirmed SELL signal, we should take precautionary steps to adjust your exposure to the equity market.




Chart: FBMFLG, FBMSCap & FBM-KLCI's weekly charts as at July 20, 2011_11.30am (Source: Quickcharts)