Market Outlook as at November 14, 2008

Since the current market rebound started in late October, I am inclined to believe that it could last for a few weeks, somewhat like the Mar-May rebound (which lasted 2 & 1/2 months). If this scenario panned out, then the KLCI may continue to go higher until it hit the medium-term downtrend line, with resistance presently at about 970-980. This scenario may fail to materialize and the current rebound may turn into a short-lived rebound (like the July rebound), if the following indicators reading appears:

1. MACD begins to hook down;
2. William %R begins to slide below the -50% level; and
3. +DI failed to stay above -DI (as per the Directional Movement Index) .

From the chart below, we can see that the third indicator has already started to fleshed a warning. This is partly due to the on-going correction in the market. If the KLCI can stay above the 880 level over the next few trading days, I believe that Directional Movement Index would turn positive again.


Chart: KLCI's daily chart as at November 13, 2008 (source: Tradesignum.com)