Market Outlook as at February 19, 2013

FBMKLCI tested its long-term uptrend line, S-S2 two weeks ago. In its current weak state, I won't be surprised if it were to re-test this uptrend again soon. While the index will have good support at the long-term uptrend line, S-S2 (at 1605) as well as the strong horizontal support of 1600, there is little catalyst for a rebound. In fact, this market rally which began in early 2009 is approaching its 4-year mark. With an impending general election around the corner, more & more investors chose to reduce their exposure in the market.

If the selling persists and FBMKLCI breaks below the 1600 mark, it could easily go down to the 1500 mark. When FBMKLCI broke its then long-term uptrend line, S-S1 was in July 2011, the index lost 16% from the breakdown level of 1565 to the low of 1310. A similar 16%-drop today would translate to a low of 1350! I have appended the weekly chart of FBMKLCI and the close-up below.


Chart 1: FBMKLCI's weekly chart as at Feb 19, 2013_3.00pm (Source: Quickcharts)


Chart 1: FBMKLCI's weekly chart as at Feb 19, 2013_a close-up (Source: Quickcharts)

Based on the above, it is prudent to stay on the sideline until the dust has settled or until lower prices are offered.