Market Outlook as at May 12, 2009

The KLCI is expected to have a short correction over the next few days (probably 2-3 days). This is based on a study of the intra-day 120-min chart, where the KLCI has broken below its 10-period SMA. In the past 2 occasions when that happened, it continued to slide to the 50-period SMA before recovering. If the same were to happen again, we can expect the KLCI to find support at about 995-1000 point.

Notice the MACD has already hooked down. On the past 2 occasions when the KLCI corrected & recovered, the MACD had traveled to the zero line before curving back up (denoted as 'a'). We may also like to look out for the same pattern to develop over the next 2-3 days.

Finally, we can see that the ADX has been declining since April 17. Presently, it has gone below 40, indicating weakness in the uptrend.


Chart: KLCI's 120-minute chart as at 9.28am 12/5/2009 (Source: Quickcharts)

While my preferred view of the market is that of a short correction, a break below 990 for the KLCI could signal a more severe correction, possibly a longer consolidation. We will have to wait & see.