Market Outlook as at December 18

The correction in the CI has just begun last week. To get a clear idea of how sharp was the recent market run-up, just look at Chart 1 below. Since the CI broke above its rising wedge formation in mid-October, it has been moving up strongly for 7 consecutive weeks. A run-up like this is not uncommon for a market that has been consolidating for the past 2 & 1/2 years. And, a correction, when it happened, gives the market & its participants a welcome breather before it rises again.

The big question is how far & how long will this correction last? Most technicians believe that the correction for the CI will not be too sharp and that it will be a short one. Most feel that the CI will not surpass the 1050 level on the downside and the market will put in a Chinese New Year rally. We will wait & see.

Chart 1: CI's weekly chart as at Dec 15

For the retail players in the street, the current correction has been anything but shallow. A look at the Mesdaq index & the 2nd Board index shows the carnage of the current correction. As noted in any earlier post, the Mesdaq might be hit by correction in its 2 best performing stocks i.e. MTouche & GPacket. These 2 stocks have corrected; with GPacket breaking its immediate uptrend line of RM4.50 level and MTouche marginally below its long-term uptrend line of RM4.66 level. As a result thereof, the Mesdaq index has broken below its medium-term uptrend line (see Chart 2 below).

Chart 2: Mesdaq's daily chart as at Dec18

The 2nd Board is now at the uptrend line support of 90 after breaking its immediate uptrend line support of 92. We will have to wait & see whether the 2nd Board will stage a rebound from here or going the way of Mesdaq index i.e. going lower.

Chart 3: 2nd Board's daily chart as at Dec18

Based on the above, I believe that the correction may go on a while longer. Accumulation should be carry out slowly.