Market Outlook as at December 13

From Table 1 below, you can clearly see that the CI has broken its immediate uptrend line at about 1090 level (or, 1087 level as stated in an earlier post). This breakdown may bring the CI to its medium-term uptrend line support at 1015 level (see Table 2 below). Along the way, it may find supports from the 20-day SMA at 1070 & 50-day SMA at 1020.


Table 1: CI's daily chart from Sep to Dec 2006



Table 2: CI's daily chart from Jun to Dec 2006

The market has benefited from the strength of its top blue chips, which is represented by the FBM30 index. FNM30 was able to stay above its immediate uptrend line (aa) until today. Its daily MACD indicator has yet to do a negative crossover (i.e. it hasn't given a SELL signal as at Dec 12). See Chart 3a & 3b for the recent movement of FBM30.

Chart 3a: FBM30 overlaid with trend lines


Chart 3b: FBM30 overlaid with moving averages

The second-tier blue chips, represented by FBM70, are relatively weaker. FBM70 has a sharp fall on Dec 12, which broke its immediate uptrend line (aa) support at 7200 level. Its daily MACD indicator has hooked down earlier. See Chart 4a & 4b for the recent movement of FBM70.

Chart 4a: FBM70 overlaid with trend lines


Chart 4b: FBM70 overlaid with moving averages

I've made a comment earlier that "if the CI breaks its uptrend line at 1087 level, I expect the consolidation of the market to last for a few weeks." The phrase "a few weeks" may appear to some to be extreme. I think it would be more helpful if I were to re-phrase that as "1 to 5 weeks". The thing with market correction is that we can never tell how deep or how long it may last. The only thing that we can take comfort in is that we are in a season that is generally positive for equity, from either year-end window dressing or lunar new year rally. And, even those two are not sure things.