Market Outlook as at 4 December 2020

We had a few days of good market last week. FBMKLCI is now pushing against the horizontal line at 1620. If FBMKLCI can surpass this level, the uptrend in the broader market will begin inearsest.

Chart 1: FBMKLCI's weekly chart as at Dec 4, 2020 (Source: Malaysiastock.biz)

Meanwhile, the small cap & fledgling stocks are racing up. FBMFLEDG has surpassed its immediate downtrend line, RR at 16000. It might revisit its 2017 high of 20100.

Chart 2: FBMSCAP's weekly chart as at Dec 4, 2020 (Source: Malaysiastock.biz)

Similarly, FBMSCAP has gone above the line connecting the recent high, R2-R2 at 14000. It is likely to test the long term downtrend line, RR at 16200.

Chart 2: FBMFLEDG's weekly chart as at Dec 4, 2020 (Source: Malaysiastock.biz)

Based on the above charts, the market is well-suited for trading in small cap & fledging stocks. If FBMKLCI were to break above 1620 convincingly, we will see a broad-based rally in the market. 

Market Outlook as at 1 December 2020

Yesterday, the index plunged in the last minutes of trading- adding 24 points to the earlier 20-point drop. This caused the FBMKLCI to plunge a head-spinning 44 points to end the day at 1563.

Chart 1: FBMKLCI's 15-min intra-day chart as at 30 November 2020 (Source: Malaysiastock.Biz)

The daily chart shows that the index is now resting on the horizontal line at or near 1560.

Chart 2: FBMKLCI's daily chart as at 30 November 2020 (Source: Malaysiastock.Biz)

Everyone with some investment in the stock market would be sitting at the edge of the seat and woul be wondering "what happened?" It does not help if you were to look at The Edge CEO Morning Brief this morning. The headline below is suggesting that there is a reason for the selldown. If that's true, then the selldown might continue. 

That's not the case. Even if MSCI review is taking place- and this happens on a regular basis- no fund manager would selloff his shareholding indiscriminately, like what happened yesterday from 4:45-4:50 pm. The last minutes selldown yesterday- like sudden huge rallies at the last 5 minutes of trading at the month-end- is very likely driven by fund managers to show a different view of their books. It is also possible that it may be carried out to affect the index in order to give a different settlement value to the expiring futures contracts.

At the opening bell this morning, FBMKLCI has rebounded with a 25-point gain. Now, it seems the chase for bargains is on. To everyone who was worried sick last night, I can only wish you a happy hunting today!!

Market Outlook as at November 6, 2020

Last Friday, FBMKLCI broke above its medium-term downtrend line, RR at 1500, and rallied to close at 1520. This rally may continue this week as the world celebrates the return of sanity in America (barely). I expect FBMKLCI to challenge the next 2 resistance levels at the horizontal lines at 1540 & 1590 this week. 

 Chart 1: FBMKLCI's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

The same pattern was witnessed in FBMEMAS, which broke above its medium term downtrend line, RR at 10950 last Friday. It may test its next 2 resistance levels at the horizontal lines at 11050 and 11400.

 Chart 2: FBMEMAS's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

In New York, the MSCI Emerging Market ETF broke above the Jan 2020 high at 46 last Wednesday. It rallied to close the week at 47.93. This bullish breakout may signal the shifting of fund to emerging market as the incoming Biden administration is expected to raise taxes to finance its more progressive fiscal policies. 

Chart 3: EEM's weekly chart as at Nov 6, 2020 (Source: Stockcharts.com)

Based on the above, the market is likely to go higher in the near term. You may buy some beaten down blue chip stocks, such as Tenaga, Airport and Genting, if you want to ride on the expected price recovery. 

Market Outlook as at October 30, 2020

Last Friday, FBMKLCI broke below the support from the horizontal line, AB at 1480. If FBMKLCI does not recover quickly over the next 1-2 day(s), it may continue to slide to the next support at the horizontal line, XY at 1415.

Chart 1: FBMKLCI's daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

If we are concerned that the fall in FBMKLCI may be caused by month-end closing shenanigans, then you can take a look at FBMEMAS (below). That index has not broken the line, AB connecting the 2 recent troughs. If FBMEMAS were to break below the AB line at 10600, then it may continue to slide down to the next support at the horizontal line, XY at 9860. 

Chart 2: FBMEMASs daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

The non-confirmation from FBMEMAS does not take away from the current precariousness of our stock market. Below are the state of the various sectoral indices in our market:

Sectoral indices that are in a downtrend:

• Transportation: https://www.tradingview.com/x/hkVLUTqT
• Telecommunication: https://www.tradingview.com/x/EROQ1PAr
• Property: https://www.tradingview.com/x/WaJMd5Hf
• Financial Services: https://www.tradingview.com/x/dQ5CuMKL
• Construction: https://www.tradingview.com/x/uetgG9Dj
• Energy: https://www.tradingview.com/x/bJGJmkfi

Sectoral indices that have started their downtrend:

• Plantation: https://www.tradingview.com/x/XfSWq2ry
• Consumer prod: https://www.tradingview.com/x/QHNGkusy

Sectoral index that has peaked:

• Industrial Prod: https://www.tradingview.com/x/rfA5IX8b

Sectoral indices that are still in an uptrend:

• Health care: https://www.tradingview.com/x/iVBlmfhm
• Technology: https://www.tradingview.com/x/XCViBOJb

 Based on the above, we have to be very careful in taking large position in the market. 

Market Outlook as at 17 August 2020

FBMKLCI has been consolidating since the beginning of August. If we drew a line connecting the low from end March (not mid-March) to date, we can see that this line, SS should provide support to the index at 1545. With both MACD and Directional Movement indicators showing negative reading, the index is not expected to stage a strong rebound from the "uptrend" line, SS in the near term. 

Chart 1: FBMKLCI's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)

As noted in the recent market outlook post, our market is driven by 3 big theme plays. The first one is the play or rally on health care stocks (or, more specifically, glove stocks). From Chart 2 below, we can see that this index is likely to correct for a while since its MACD has hooked down.

Chart 2: Health Care Index's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)

The second driver is technology stocks. This sector has also hooked down- even attempted to test its "uptrend line" on 12 August. Like health care index, the technology index is expected to remain weak after its MACD has hooked down.

Chart 3: Technology Index's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)

The third driver is the droves of retail players getting into the market, probably driven by FOMO or fear of missing out. Many of the latecomers tend to zero in on the cheap stocks, and if we were to extract the total volume from the Top 35 Volume Stocks from 6 August to date, we would get an indication of how much of an impact this buying had on the market. I have tabulated and also plotted a graph of this below. 

Table: Volume of Top 35 Volume Stocks compared to Overall Market Volume from Aug 6 to 14

Graph: Volume of Top 35 Volume Stocks compared to Overall Market Volume from Aug 6 to 14

Since the high volume stocks are generally 3rd liner and fledgling stocks (trading at less than 10 sen each), we can assume that the volume traded represents retail participation. They accounted for a whopping 60-64% of overall market volume on the 2 biggest volume dates in our market to date, i.e. 7 & 11 August. Since then, the volume of the top 35 highest volume stocks had receded. If retail participation stays low, then the market will likely to remain weak for a while.

Based on the above, we should remain cautious and wait out the market correction before taking more aggressive action. Good luck.

Market Outlook as at 10 August 2020

Last week we witnessed spectacular volume in the market that's reminiscent of the Super Bull Run of 1993. This is especially true on Friday when volume touched an all-time record of 26.65 billion units- a staggering volume which caused the trading to stall on Bursa Malaysia in the last hour of trading (see Chart 1). It will be interesting to see how the market will absorb the volume over the next 2 days.

Chart 1: FBMKLCI's daily chart as at August 7, 2020 (Source: Malaysiastock.biz)

At the same time, the market saw fearless buying which led to multibagger stocks born in a matters of 2-3 months- truly a sight to behold. Few will surpass the spectacular rallies achieved by Topglov and Supermx (see Chart 2). 

Chart 2: Topglov and Supermx's daily chart as at August 7, 2020 (Source: Malaysiastock.biz)

Many may recall the bull market that followed the aftermath of a crisis - AFC 1998 and GFC 2008 (see Chart 3). We are again at the cusp of a bull market as the crisis from Covid-19 pandemic subsides.

Chart 3: FBMKLCI's monthly chart as at August 7, 2020 (Source: Yahoo Finance)

Those who had experienced the Super Bull Run 1993 will remember what it's like to be in the vortex of a market mania. Last few weeks of market activities has all the hallmarks of a Super Bull Run. Away from the charts and the trading volume, you will find punters placing huge buy orders on contra basis which breached trading limits again and again. These players would easily humble the fearless men from the British SAS unit whose motto is: Who Dares Wins!

A quick glance at the major indices revealed that the bull market is still very selective. Blue chip stocks are hardly charging (see Chart 4) while small-cap stocks are only getting into the act of going up. (See Chart 5). The medium-cap stocks and fledgling stocks have extended their gain last week (see Chart 6 & 7) but the real action can be seen among tech-laden ACE Market stocks (see Chart 8). As mentioned in previous posts, the rallies in our market started with tech stocks in early April and blown apart by the pandemic stocks in early May. Now it is spreading out to the low priced fledgling stocks. 

Chart 5: FBMKLCI's weekly chart as at August 10, 2020 (Source: Malaysiastock.biz)

Chart 5: FBMSCAP's weekly chart as at August 10, 2020 (Source: Malaysiastock.biz)

Chart 6: FBM70's weekly chart as at August 10, 2020 (Source: Malaysiastock.biz)

Chart 7: FBMFLEDGLING's weekly chart as at August 10, 2020 (Source: Malaysiastock.biz)

Chart 8: FBMACE's weekly chart as at August 10, 2020 (Source: Malaysiastock.biz)

In this extremely bullish environment, a remisier can only say so much. To preach about investing in stocks with good fundamentals and reasonable valuation will be like casting pearls before swine. So the only thing to do is to stand back and let the party continues....

Market Outlook as at 6 July 2020

Last week, FBMKLCI rallied and re-established its position just above its previously violated uptrend line, SS. The recovery was fairly broad-based though the big gainers were concentrated in the glove stocks and the technology stocks.

Chart 1: FBMKLCI's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

The rally among the glove stocks, which is part of the health care sector, helped to push the health care index to a new high.

 Chart 2: BM Health Care index's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

Similarly, the rally in the tech stocks has pushed the Technology index to a new high in the current rally! At a close of 43020, Technology index is not far from its all-time high of 44610 recorded in January 2018.


Chart 3: BM Technology's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

The rally in tech stocks had earlier shown its potential when it helped FBMACE to make a new high in the current rally (see Chart). If you looked at the monthly chart (Chart 5), you will see that FBMACE has just surpassed the line connecting the high recorded its April 2015 & January 2018. This could mean that FBMACE may continue to trend higher. However, we should be careful to avoid a bull trap since the FBMACE stocks have rallied substantially over the past 4 months after it came off a deep selldown in March which was a bear trap.


Chart 4: FBMACE's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

Chart 5: FBMACE's monthly chart as at July 3, 2020 (Source: Malaysiastock.biz)

In the current market, where winners keep getting pricier and non-performers remain dull (if not down), it is hard to recommend stocks with strong conviction. If the market is too confusing for you, then you should stick to cash or those stocks that you are comfortable investing in. Just tell yourself, you have good companies if you are sitting on cash or staying on the sideline (here and here).

Market Outlook as at June 29, 2020

Last week, FBMKLCI closed just a tad below its uptrend line. This - together with the a convincing breakdown of the uptrend line for FBM70 - will likely point to further weakness ahead for our market for this week.

Chart 1: FBMKLCI's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

Chart 2: FBM70's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

2nd & 3rd liner stocks are likely to have drop only slightly, as shown by the sideways movement of FBMSCAP. Then again, these stocks did not raise sharply, except for a selective few and the chart is showing a pattern that looks like a rounding top. If this index were to break down below 11500, the decline will likely be more broad based. 

Chart 3: FBMSCAP's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

If you looked through all the indices of the various sectors on Bursa Malaysia, the ones that stood out are the health and technology sectors. The health sector has benefited from the huge rally for glove stocks and "pandemic" stocks while technology stocks have rallied due to the rally for e-commerce and related stocks. One surprising sector that has managed to keep its uptrend line in tact is plantation sector. See the charts below.

Chart 4: BM Health's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

Chart 5: BM Technology's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

Chart 6: BM Plantation's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

For the next few days, you can expect the broad market to be weak and trading to be choppy. 

Market Outlook as at June 19, 2020

Last week's correction has brought the FBMKLCI to the medium-term uptrend line, SS at 1500. The index is now hovering just below the long-term downtrend line, RR which stretches back to April 2018. With MACD hooked down and Stochastic RSI in the oversold territory, the index may continue to consolidate for a while. A break below the 1500 level could send the index to the 1450 level, which is the line connecting the recent lows after the rally began in March.

Chart 1: FBMKLCI's daily chart as at June 19, 2020 (Source: Malaysiastock.biz)

The weakness among the blue chip stocks - especially among the glove stocks - have not stopped the play among the 2nd and 3rd liner stocks. In fact, small-cap stocks and tech stocks have been charging higher, which reflects a similar trend in Nasdaq. See the charts for Dow and Nasdaq below.

Chart 2: FBMACE's daily chart as at June 19, 2020 (Source: Malaysiastock.biz)

Chart 3: DJIA's daily chart as at June 19, 2020 (Source: Stockcharts.com)

Chart 4: Nasdaq's daily chart as at June 19, 2020 (Source: Stockcharts.com)

Based on the above, I believe the broad market may hold steady for this week. Trading will continue to be choppy, and it will favor those who are nimble and ruthless. Good luck!!

Market Outlook as at June 16, 2020

Our market took a severe blow yesterday. The FBMKLCI has dropped back below the 200-day SMA line as well as the downtrend line, SS which stretches back to April 2018. The indicators have turned bearish with MACD hooked down and Stochastic RSI below 50. 

Chart 1: FBMKLCI's daily chart as at Jun 15, 2020 (Source: Malaysiastoc.biz)

The question that arose is whether the all green light which I pointed out earlier (here) is now negated. The conditions that must be satisfied on the weekly basis are:

1. Index rose above both 10 & 20-week SMA lines
2. MACD crossed above the MACD signal line
3. Stochastic RSI was above 80 (or, in oversold territory)
4. +DMI crossed above -DMI and continued to diverge

Chart 2: FBMKLCI's weekly chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 15) (Source: Malaysiastoc.biz)

Looking at the weekly chart above, the index is still meeting the above conditions. However, we cannot ignore the warning sign of the failed breakout above the downtrend line, RR. Together with the failure to stay above the 200-day SMA line (as highlighted in Chart 1 and Chart 3), we have to be careful that the market uptrend may fail to take off & reverse. 

Chart 3: FBMKLCI's daily chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 15) (Source: Malaysiastoc.biz)

We will watch the market for the next few days to assess whether the current severe correction will change the trajectory of the market, resulting in more consolidation.

Market Outlook as at June 4, 2020

Yesterday our FBMKLCI rose 30.84 points to 1538.53. It broke above the 200-day Simple Moving Average ("SMA") line at 1520. It may soon test the intermediate downtrend line (in red) at 1550 soon. The same pattern can be seen in FBMEMAS chart. Look at the FBMKLCI and FBMEMAS below.

Chart 1: FBMKLCI daily chart as at Jun 3, 2020 (Source: Malaysiastock.biz)

Chart 2: FBMEMAS daily chart as at Jun 3, 2020 (Source: Malaysiastock.biz)

The question of whether the market has now satisfied the conditions laid down in my earlier post (here) to call the beginning of a market's next upleg must be examined again. To wit:

The set-up for both market uptrends in November 1998 (the numbers are in blue) and March 2009 (see the numbers in green) are:

1. Index rose above both 10 & 20-week SMA lines
2. MACD crossed above the MACD signal line
3. Stochastic RSI was above 80 (or, in oversold territory)
4. +DMI crossed above -DMI and continued to diverge

The failed market uptrend in June 1998 fell short in one area, namely after +DMI had crossed above -DMI, they did not diverge but instead became entangled and eventually reversed. This could be due to the failure of the index to go above the 40-week SMA line, which eventually reversed downward.

As at yesterday, we can see that all the above 4 conditions have been satisfactory.

Chart 3: FBMKLCI's weekly chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 3)

Like in the past 2 earlier crisis periods, we are now above the 200-day SMA line, which signals the entry into the bullish phrase in the market.

Chart 4: FBMKLCI's daily chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 3)

Based on the above, I believe the next upleg in the market has begun. Some may still want the main indices (FBMKLCI and FBMEMAS) to break above their respective immediate downtrend lines before pulling the trigger. It is still good to play it safe and by buying into the laggards (say, Maybank over PBBank) and doing so progressively. Good luck.

Market Outlook as at May 21, 2020

The market has been on the roll in the past 6 days. Volume has increased substantially above 7 billion units traded a day. In fact, there were 3 days of 9 billion units traded (on May 13, 15 & 19) and there was one day of 11 billion units done (on May 18). While the play has been concentrated in the 2nd and 3rd liner stock, even the blue chip stocks have seen a pick-up in volume as well as price gain.

 Yesterday, FBMKLCI surpassed the recent intra-day high of 1429 recorded on April 20. With MACD starting to climb up, after entering the positive territory in late April, and ADX beginning to turn up, though still below the 25 mark, we may be seeing another upleg in this rally. If FBMKLCI can break above the 100-day SMA line at 1455, it has a clear path to the test of the psychological 1500 mark as well as the 200-day SMA line at 1520 in the next 1-2 weeks. Bear in mind that the long-term downtrend line, RR will pose a resistance at 1550.

Chart 1: FBMKLCI's daily chart as at May 20, 2020 (Source: Malaysiastock.biz)

Chart 2: FBM70, FBMSCAP, FBMFLG & FBMACE's daily charts as at May 20, 2020 (Source: Kenanga's BTX chart)

The big question in every investors' mind now is whether the bear market is over. The quick answer is a NO. I have to refer you back to my post in March where I compared the current downturn to what we had in the Asian Financial Crisis in 1998 as well as the Global Financial Crisis in 2008 (here).

In that post, I lay down the set-up for the start of market uptrends, as witnessed in November 1998 (the numbers are in blue) and March 2009 (see the numbers in green) are:

1. Index rose above both 10 & 20-week SMA lines
2. MACD crossed above the MACD signal line
3. Stochastic RSI was above 80 (or, in oversold territory)
4. +DMI crossed above -DMI and continued to diverge

The current rally is still developing (see the numbers in black) with conditions (2) and (3) met while conditions (1) and (4) are still pending. We can refer to the failed market recovery in June 1998 which didn't meet condition (4) as well as not fully satisfy condition (1) i.e. unable to cross above the 40-week SMA line. 

Chart 3: FBMKLCI's weekly chart for 1997-1999, 2007-2009 and 2018-2020 (Source: Malaysiastock.biz)

However, we may be getting ahead of ourselves- no thanks to 6 days of big volume! If we referred to the daily charts for 1998 and 2008, we can see that the 100-day SMA line capped the initial rally at points (A) and (B). Today we are again coming very close to the 100-day SMA line [approaching point (C) at 1455].

Chart 4: FBMKLCI's daily chart for 1997-1999, 2007-2009 and 2018-2020 (Source: Malaysiastock.biz)

In conclusion, our market's short-term target is the 100-day SMA line at 1455. An upside break out of the 100-day SMA line may see the index going up to the psychological 1500 mark as well as the 200-day SMA line at 1520 in the next 1-2 weeks. 

Some players believe that even if FBMKLCI were to falter, the play in our market will continue as retail players are all charged up to punt on 2nd and 3rd liner stocks. I am inclined to believe that the rally in lower liner stocks may continue if the FBMKLCI is still heading higher. Good luck to all in your trading & investing. As always, be careful out there.