Wednesday, April 04, 2012

Market Outlook as at April 4, 2012

Our FBMKLCI dropped about about 9 points in the afternoon session. I have appended below the 180-minute chart of FBMKLCI. You can see the steady rise of this index since the end of November last year. Within this rally, the index would break above the recent high; consolidate for a few days; and moved to a new high. Of course, our index had also made a new all-time on April 2- a mixed development given the poor market breadth & unconvincing volume.

If we just focus on the current 4 months old rally, we can expect the index to consolidate its recent gain. This corrective move will bring the index to the 10-period SMA line support at 1599-1600 and then to the 20-period SMA line at 1594-1595. This initial correction would last for 1-2 days. Then the index will test the uptrend line (SS) support at 1590-1592 and the 50-period SMA line at 1586-1588. This latter stage correction would last for 3-5 days. If the index can break above the recent high of 1609, this rally will keep to its schedule. We must be prepared that the rally may finally change course, either accelerating (which is not very likely) or reset to a more gradual course (which is more likely in order to accommodate for the laggards). If you agree with my assessment of the probability of the direction of the index, then you should take some precautions in the market.

Chart: FBMKLCI's 180-min chart as at April 4, 2012_4.00pm (Source: Quickcharts)


Anom said...

Hi Alex,

What is your opinion to our market should there is a change in government?

Layman said...

Many said gold index is going to test another height soon,what is your view this aspect? Thanks

Alex Lu said...

Hi Anom

I think Malaysian investors are ready for that eventuality since March 2008, but I doubt we will see a change of government in the next general election.

Alex Lu said...

Hi Layman

I think it is possible that gold may test its recent high. However, the prospect of that happening within the next six months is low. Fed has sounded cautious on QE3 while ECB is not likely to do more LTRO after the huge €1 trillion injection over the past 4 months. Unless things spin out of control again in the Eurozone, I think the economic news flow will likely to be mildly positive for the next six months. This will allow Fed & ECB to ease off on their monetary policies and this will be bullish for USD & EURO but negative for gold.

Who knows how the global economy will perform in late 2012 or 2013? If things slide again, we may see the return of Quantitative Easing in US & more LTRO in Eurozone. That will cause gold to rally afresh.