Market Outlook as at March 1, 2007

Yesterday, our market opened with a very sharp drop to a low of 1136.01 (a loss of 101.07 points) but it managed to crawl back & closed at 1196.45 (a loss of 40.63). Losers outnumbered gainers by 916 to 178, with volume traded of 4.0 billion units.

While the numbers are very frightening, we can take some comfort that many stocks had recovered substantially from their lows & were able to close very near their opening price. The net effect is most stocks exhibit a hammer in their respective chart. In Japanese candlestick charting method, a hammer is formed "when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick." (go here more information). If you look at the charts below, you will see that a hammer was also formed in the KLCI. From Chart 1, you can see that the KLCI has rebounded from its medium-term uptrend line (support at 1120/30). In the sharp fall, a gap was formed (see Chart 2). The gap at 1220 & the psychological resistance of 1200 will be the test for our market for today.



Chart 1: KLCI's daily chart as at Feb 28 (overlaid with trend lines)



Chart 2: KLCI's daily chart as at Feb 28 (overlaid with moving averages)

Overnight, Wall Street rebounded with Dow Jones industrials rising 52.39, or 0.43 percent, to 12,268.63. The broader stock indicators also managed gains. The Standard & Poor's 500 index climbed 7.78, or 0.56 percent, to 1,406.82, and the Nasdaq composite index rose 8.29, or 0.34 percent, to 2,416.15.