Thursday, December 14, 2017

Market Outlook as at December 14, 2017


At the end of the morning session, FBMKLCI rose 15.67 points to close at 1753.33. Gainers outnumbered losers by 352 to 245. The reason for the market rally was the positive revision of our growth by World bank from 5.2% set in October to 5.8% now (here).

We can see from the daily chart below that FBMKLCI has broken above the intermediate downtrend line yesterday. The sharp rally has managed to overcome even the strong resistance from the horizontal line at 1750, which is also the 200-day SMA line. If it can stay above this level _ a resistance-turned-support - the market can draw in buyers for the other sectors that are still lagging today.


Chart 1: FBMKLCI's daily chart as at Dec 14, 2017_2.30pm (Source: Malaysiastock.Biz)

When I looked thru the charts last night, the only sectoral index that had an upside breakout was the Finance index. The 4-year daily chart is shown below.


Chart 2: Finance's daily chart as at Dec 13, 2017 (Source: Shareinvestor.com)

The indices of second liner stocks (FBM70), third liner stocks (FBMSCAP) and FBMACE did not give any positive sign of an impending recovery or reversal. 


Chart 3: FBM70's daily chart as at Dec 13, 2017 (Source: Shareinvestor.com)


Chart 4; FBMSCAP's daily chart as at Dec 13, 2017 (Source: Shareinvestor.com)


Chart 5: FBMACEs daily chart as at Dec 13, 2017 (Source: Shareinvestor.com)

The sharp rally this morning may continue to draw in more buying and if this can broaden up to the other sectors, not just the finance sector, then we may see a broad-based market recovery. Talks of a CNY rally is exciting but a bit premature. I will adopt a wait-and-see attitude towards the developing market rally. Buying of laggards may not be a bad idea but you should still exercise restraint. Good luck!

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