Market Outlook as at September 26, 2017

FBMKLCI made a high of 1793 on September 13. Since then, it has been sliding and yesterday, it made a low of 1761. It seems to have formed an irregular triangle, with the upper line acting as a resistance at 1792-1793 and the lower line acting as support at 1759-1760. A breakout on the downside would convert this likely continuation pattern into a reversal pattern; by simply hanging a sign that reads double top reversal in place of triangle. However I am leaning towards a triangle- expecting the market to stabilize next few days and recovery to kick in after that. See Chart 1 & 2 below.

Chart 1: FBMKLCI weekly chart as at Sep 26, 2017 (Source: Shareinvestor.com)


Chart 2: FBMKLCI daily chart as at Sep 26, 2017 (Source: Shareinvestor.com)

Until the blue chip stocks have sorted out their next price direction, the play has now shifted to the 2nd liner stocks (in FBM70) and 3rd liner stocks (in FBMSCAP & FBMFLG). From the next 3 charts, you can see that these indices have broken above their respective intermediate downtrend lines.


Chart 3: FBM70 weekly chart as at Sep 26, 2017 (Source: Shareinvestor.com)


Chart 4: FBMSCAP weekly chart as at Sep 26, 2017 (Source: Shareinvestor.com)


Chart 5: FBMFLG weekly chart as at Sep 26, 2017 (Source: Shareinvestor.com)

As noted last week, I believe the play in the tech sector is probably due for correction. We saw a bit of that in the price pullback for semiconductor stocks.


Chart 6: FBMACE weekly chart as at Sep 26, 2017 (Source: Shareinvestor.com)

One bit of information that may be useful in gauging whether the market still has more room to go or due for a deeper dive is the information of weekly inflow of foreign fund into Malaysian equity. This information is published on a weekly basis by The Edge Daily, and it is sourced from Bursa Malaysia. I have combined the FBMKLCI weekly chart with the foreign fund flow since January 2016 below. It shows that the foreign fund inflow had coincided with the sharp rally in Mar, April & May. This inflow has not left our shore yet. That explains the shallow correction in FBMKLCI.

Chart 7: FBMKLCI weekly chart as at Sep 26, 2017 & Foreign Fund Flow (Source: Shareinvestor.com & Bursa Malaysia, via The Edge Daily)

Based on the above, I think you can nibble into beaten blue chip stocks and trade breakouts among the 2nd and 3rd liner stocks but avoid tech stocks for a while. Good luck!