Tuesday, May 15, 2012

Market Outlook as at May 15, 2012

FBMKLCI went below the low of 1567 recorded on April 27. Other negative indications are the 20-day SMA line cutting below the 40-day SMA line and the MACD re-entering the negative territory. The last time the 20-day SMA cut below the 40-day SMA line was on August 5, 2011; just before the sharp selldown of August & September. The MACD entering into the negative territory could herald an acceleration in the short-term downtrend. ADX has also hooked up while -DMI is rising against a sliding +DMI. As such, the market outlook is bearish.

Chart 1: FBMKLCI's daily chart as at May 14, 2012 (Source: Quickcharts)

Despite the poor sentiment, FBMKLCI is still in a long-term uptrend line, SS. However, further decline- in line with the decline in global equity markets- could push the market to test the uptrend line at 1420. While the long-term uptrend may remain intact, a fall from here could still be damaging to anyone's portfolio. At this moment, both weekly MACD & RSI are weak and trending lower while the -DMI is sliding & +DMI is rising.

Chart 2: FBMKLCI's weekly chart as at May 14, 2012 (Source: Quickcharts)

Based the above, we should be very cautious in the market in view of the bearish outlook for the short-term. However, it is not necessary to sell aggressively or substantially as the long-term trend is still up.

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