Market Outlook as at November 1, 2011

Our FBMKLCI index is likely to be tracing out the 3-fan uptrend line. If so, it could be testing its 2nd fan-line where the support is at 1475. A break below that level could see the index dropping further to the potential 3rd fan-line where the support will be at 1450. I hope that the index can find support at the 3rd fan-line and stage a recovery. If the 3rd fan-line has been established, this line will be a critical support for the market. The breakdown of the 3rd fan-line shall mark the end of the short-term uptrend.


Chart 1: FBMKLCI's 60-min chart as at Nov 1, 2011_4.40pm (Source: Quickcharts)

For the past few weeks, I found it very difficult to be too excited about the market because I am still worried that this rally is nothing more than a bear rally. From the monthly chart below, we can see that market outlook has not changed & it remained negative as at October 31.


Chart 2: FBMKLCI's monthly chart as at Nov 1, 2011_4.40pm (Source: Quickcharts)

Based on this long-term bearish outlook, we should remain cautious in the market despite recent positive news (of the setting up of the EFSF in Europe & positive economic data from the US).