Market Outlook as at November 14, 2016

FBMKLCI broke the support from the rising "horizontal" line, SS at 1620 today. The market may attempt a technical rebound tomorrow to recover above this "horizontal" line. If a rebound can gather sufficient momentum, it may even test the horizontal resistance at 1650. The next resistance from the intermediate downtrend line, RR at 1670 will be a bridge too far.

 
Chart 1: FBMKLCI's daily chart as at November 14, 2016 (Source: Shareinvestor.com)

However, if the immediate support cannot hold up the market, the index will soon test the psychological 1600 level. And, if the 1600 level is also violated, the index could revisit the August 2015 low of 1500.


Chart 2: FBMKLCI's monthly chart as at November 14, 2016 (Source: Shareinvestor.com)

I have appended below the intra-day chart of FBMKLCI. Since the unexpected result of the US Presidential Election was announced on November 9 (Malaysian time), we have seen an immediate sharp drop on the same day; one hopeful day of gain ensued; and 2 days of decline (including today). You may note that there were tentative signs of accumulation of some beaten down stocks in the afternoon session. However, last minute selling pushed their prices to close at the low of the day. With European markets opening on a firmer note, we may see a better market tomorrow.


Chart 3: FBMKLCI's60-min intra-day chart as at November 14, 2016_3.30pm (Source: Shareinvestor.com)

In my opinion, investors are only beginning to adjust their investment portfolio to the new reality of a riskier economic and investment environment that comes with a Trump Presidency. If suddenly many investors want to reduce their equity holding and invest in a safehaven asset, like gold or cash, the process can only be worked out if share prices were to go lower. Lower prices draws in new investors who would absorb the selling pressure. This takes time.

For now, I am in favor of reduced exposure to stocks. When stocks start to show lower prices (than today), you should get back into the market by investing in beaten down blue chip stocks. Trump may be here for 4 years but the stock market will be here as long as we have free enterprise. Good luck!