Market Outlook as at September 22, 2015

FBMKLCI failed to hang onto to its upside breakout of the neckline of the head and shoulders formation (mentioned earlier). FBMKLCI tested the neckline as well as the downtrend line, RR and reversed. It may find support at the 1620-1630 level.

 
Chart 1: FBMKLCI's daily chart as at September 21, 2015 (Source: ShareInvestor.com)

We can see that FBM70 (representing the second liners) had also tested its downtrend line cum horizontal resistance at 12400 and failed to surpass it. See Chart 2 & 3 below. 

 
Chart 2: FBM70's daily chart as at September 21, 2015 (Source: ShareInvestor.com)

 
Chart 3: FBM70's monthly chart as at September 21, 2015 (Source: ShareInvestor.com)

Based on our earlier study of Valuecap market operation in 2003, we may have seen the end of the initial round of buying. This large scale buying of blue chip stocks had propelled the index higher and when the buying subsided, the index retraced. We hope that the next phase would see steady buying on 2nd & 3rd liner; thus providing support for the broader market.

However we must be alert to the possibility that things may turn out differently as compared to 2003 since the political landscape is very different today. In addition, our market has benefited significantly from the recovery of the global equity market in 2003. Today, we may have seen a top in the global equity market with more selling to come in the weeks and months ahead.

In times like this, it is not easy to be an investor. To abstain completely is not advisable. To buy aggressively is out of the question. You would have to calibrate your buying while reminding yourself that it is likely to be a long haul. Keep in mind that there are stocks out there that have been beaten down to a level where their true value is more than the market price. Only in good times will this value be fully appreciated. The profit from the investment is the reward for taking risk in this hard times.