Friday, August 07, 2015

Market Outlook as at August 7, 2015

This morning, FBMKLCI broke below its past 1 month low of 1685. It is now struggling to stay above the line connecting the lows for the past 1 year (AB) at 1680. As at 3.00pm, this support is holding and hopefully we can see a rebound at the close. The fact that there has not been a strong rebound yet, is discomforting. Why? 

Chart 1: FBMKLCI's daily chart as at August 7, 2015_12.30pm (Source: ShareInvestor)

If you look at the monthly chart below, you will see that the line, AB is no ordinary line. It is the neckline of a Head-and-shoulder formation- one of the more reliable reversal pattern. The last time we saw a Head-and-shoulder reversal was in 2008. We are now staring at a similar set-up and if the index breaks below 1680, we will have a confirmed Head-and-shoulder reversal with a downside target of 1480.

Chart 2: FBMKLCI's monthly chart as at August 7, 2015_12.30pm (Source: ShareInvestor)

Meanwhile, the DJIA has broken its uptrend line. Its MACD indicator is poised to venture into negative territory. When that happens, we should be seeing the start of a downtrend for DJIA.

Chart 3; DJIA's weekly chart as at August 6, 2015 (Source:


James Fernandez said...

A recession in 2016?

Alex Lu said...

Hi James Fernandez

The crash in the commodity complex reflect a slowdown in global economy. The recent crash in the Chinese stock market - the second largest economy in the world - would add to this problem in the form of negative wealth effect.

In Malaysia, we are feeling the drop in crude oil prices as well as lower CPO prices, to some extent. Consumer spending has declined due to poor sentiment. The only driver is construction industry as the Government revs up the major infrastructure projects. While I don't think we will fall into a recession soon, the stock market does not need a recession to correct sharply; only things getting from bad to worse! And, we already seeing that!