Market Outlook as at June 19, 2012

Both FBMKLCI & FBMEMAS broke above their respective medium-term downtrend line at 1580 & 10800, respectively. With these breakout of the downtrend line, we can expect the market to continue to rise. While the volume has picked up, it is still relatively thin. Market breadth is still unconvincing, with gainers outnumbering losers by 467 to 264.

 
 Chart 1: FBMKLCI's daily chart as at June 19, 2012 (Source: Quickcharts)

 
 Chart 2: FBMEMAS's daily chart as at June 19, 2012 (Source: Quickcharts)

How far can this rally go? From the weekly chart below, we can see that FBMKLCI & FBMEMAS would encounter the resistance from the expanding triangle, ABCD at 1620 & 11000, respectively. We have seen similar pattern before & the outcome was a draw- an upside breakout in 2010 & a downside breakout in 2008. Would the market do an upside breakout like 2010 or would it be a downside breakout like 2008 (when the world was gripped by the US Financial Crisis)? I am inclined to believe that the latter scenario may be more likely than the former. As such, I think it is advisable to sell into strength if the market continue to rise over the next few days.

 
 Chart 3: FBMKLCI's weekly chart as at June 19, 2012 (Source: Quickcharts)


Chart 4: FBMEMAS's weekly chart as at June 19, 2012 (Source: Quickcharts)