Tuesday, October 30, 2018

Market Outlook as at October 30, 2018

On October 24, I've noted that FBMKLCI is likely to find support at 1670 for 2 reasons, namely:
1) it is the line connecting the low for the past 3 years (see chart below)
2) it is the middle line of an upward channel that stretches back for 20 year (for more, go here).
Chart 1: FBMKLCI's weekly chart as at Oct 30, 2018_11.45 (Source: Malaysiastock.biz)

If the index can hold at or above 1670 for a few days, then that support is intact and the market may stage a recovery. Today we might be seeing the start of that recovery. 

After another overnight drop for Dow Jones, one would expect our FBMKLCI to go lower. As at 12.00 noon, FBMKLCI is up 12 points to 1695. That's a pleasant surprise! Even before this small rebound, I have been feeling more positive about the market as FBMKLCI has been hovering above the critical 1670 mark for a few days. 

For me, the risk to this market has been substantially discounted. In fact, the discounting of potential bad news on the domestic front (such as project cancellation to new taxes in the budget) to foreign front (such as trade war between China & the US as well as sharp drop on Wall Street) has turned our market into a one-way street: DOWN! Having watched the steady market decline for the past few weeks, I have a gut feeling that this market is deeply oversold and the risk has now swung from downside risk to upside risk. In addition, I have a feeling that Dr. M and Lim Guan Eng will deliver a reasonably good budget which will provide a catalyst for the recovery in 2019. They have to do that; our economy cannot afford to continue with the slow death any longer!

Based on the above, I think it is not the time to sell in the market. In fact, it might well be a good time to start buying. Good luck! 

1 comment:

Joachim said...

Hi Mr Lu,

Any comment of Hong Kong stock market? It is advisable to buy now or should I wait until Xi and Trump agree to a ceasefire?