Market Outlook as at April 3, 2013

FBMKLCI started to slide at 9:30am this morning. The usual chatter about the dissolution of Parliament started all over again in the corridor & the water coolers. To be frank, I was pretty tired of the never-ending speculation of the upcoming election - an unproductive activity given the fact that it has to be announced soon or later. And, yet the market swooned and dropped a whopping 52 points when the news flashed on Malaysiakini! What a stunner! Who are those poor investors that were still waiting for the announcement to sell?!

Anyway, my take on the market is simply that it has been pretty strong. You can see that from August last year until early January this year, FBMKLCI has been trending within an expanding triangle. What this means is that the bulls get more bullish while at the same time, the bears also get more bearish. If I may put a picture to the faceless bulls, it would professional fund managers putting their money to work in the market (courtesy of US Fed, Japanese Central Bank and ECB). The bears would be anyone who think that Malaysia would have a messy outcome in the General Election.

This trend broke in late January 2013. The bears failed to push the index to the support of the expanding triangle. The index seems to have found its support at the psychological 1600 mark. After 3 failed attempts, the index rebounded and began to rise. This morning, the index came very close to the 1700 psychological resistance. Alas, we would never know whether the index could have surpassed the 1700 mark on its own momentum for the rally was cut short by the untimely announcement of the dissolution of our Parliament.

For the next 2-3 weeks, I expect the index to be range-bound between 1600 & 1700. Our index- the barometer of our economy- might take on a new & unfamiliar role as the weather vane, showing the direction the political wind is blowing.


Chart: FBMKLCI's daily chart as at April 3, 2013_12.10pm (Source: Quickcharts)