Market Outlook as at May 22, 2015

FBMKLCI & FBMEMAS are again back to the low recorded two weeks ago (point 'A'). If they go below this level, then a medium-term downtrend could begin. This would be the end of the 5-month rally that dated back to December last year. Even the support at 1770-1780 for FBMKLCI or 12100-12300 for FBMEMAS would be a poor consolation if the downtrend starts. 


Chart 1: FBMKLCI's daily chart as at May 21, 2015 (Source: ShareInvestor.com)


Chart 2: FBMEMAS's daily chart as at May 21, 2015 (Source: ShareInvestor.com)

The sharp drop in the market today seems to coincide with the news reports that Deputy Prime Minister ('DPM') has called for the sacking of the Board of Directors of 1MDB. Is this the breaking of rank between our DPM & the PM on the issue of 1MDB? Would this lead to a bigger riff and a challenge for the Presidency in UMNO?

Stock markets abhor uncertainty, especially political uncertainty. This will add to the growing list of concerns, which includes poor consumer sentiment, uncertainty in the Euro-zone, heightened geopolitical risk in the Middle East and weak global economy. Despite all these, the stock market is in its 7th year high- thanks to the unconventional monetary policies from US Federal Reserve, ECB, Japanese central bank and a host of other central banks. Where will we be without easy money?!