Market Outlook as at July 18, 2016

I will give a quick tour of the market outlook globally.

1) US markets

DJIA & S&P500 have broken above their downtrend lines while Nasdaq is poised to do the same. Despite the bullish breakout for DJIA & S&P500, the volume did not expand. ADX is still at the low- indicating lack of momentum.


Chart 1: DJIA, S&P500 & Nasdaq's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

2) Europe

CAC & DAX are in a downtrend while FTSE has broken above the downtrend!! Is the breakout due to foreign buying as a result of a sharp drop in sterling pound?


Chart 2: CAC, DAX & FTSE's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

3) BRIC (excluding Russia)

While SSEC is still languishing near the low, BSE and Bovespa had broken above their downtrend lines.


Chart 3: SSEC, BSE & BVSP's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

4) Singapore, Hong Kong & South Korea

These Asian tigers have broken above their downtrend lines and are now moving sideways.


Chart 4: STI, KOSPI & HSI's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

5) Developing ASEAN countries

Thailand, Indonesia & the Filipino stock market indices have all broken above their recent downtrend lines.


Chart 5: SETI, JKSE & PCOMP's weekly chart as at July 15, 2016 (Source: Stockcharts.com, Yahoo Finance & Bloomberg)

Why are the Thai, Indonesian & the Philippines stock markets doing so well? Why is FTSE bucking the downtrend in Europe? Why are BSE & Bovespa breaking above their downtrend lines while SSEC is still languishing? The answer could be weaker currencies. The maximum drop are: THB (down 28%), PHP (down 18%), IDR (down 60%), GBP (down 34%, not the recent Brexit-inspired plough), INR (down 58%) & BRL (down 110%).

There is one more currency which took a heavy beating: MYR which dropped as much as 46%! Based on preceding examples, one can only ask the pertinent question: Where is our bullish breakout of our downtrend?? This is the case of the dog-that-didn't-bark-in-the-night-time!

I believe that the recent BNM's OPR reduction of 0.25% to 3.0% could start the ball rolling. A much upside move in our market is very much in order. For those who are still not convinced, you may opt to buy some beaten down income stocks, such as Magnum & BJToto. If the recovery does not materialize, you would at least have an income higher than the FD rates!

 
Chart 6: FBMKLCI, FBM70 & FMT100's weekly chart as at July 15, 2016 (Source: Shareinvestor.com)