Composite Index Weekly Technical Analysis, 13/05/2005. 

Main Chart:
For the week ended on 13/05/2005, KLCI gave up 9.86 points (-1.1%). Market was closed mixed on Monday and Tuesday, but since Wednesday, selling pressures set in and pushed the index lower. For the week, weekly high was at 904.34, and the weekly low was at 888.83. 

Current for KLCI falls on the L2 support at 885.5 points as well as the 890.96 points of the WinChart Automatic Fibonacci Retracement. Conversely, resistances are located at the 10 days Bollinger Middle Bands, 900.38 of the WinChart Automatic Fibonacci Retracement, and further up at L1, around 907.5 points. 

Bollinger Bands:

Due to last week’s immense market, KLCI had breached above the 20 days Bollinger Upper Band, thus triggered a pull-back effect, which started on occurred on the 5^th of May. Therefore, just as what we had anticipated, KLCI pulled back towards its target at the 10 days Bollinger Middle Band. At the same time during the pulled back, Bollinger Band Width contracted, indicating the market was consolidating thus giving no signals of which direction the KLCI is heading to. Nevertheless, we shall be able to get a clearer picture when the band width opens. (Refer to A) 

Volume:

Total market volume for the week has increased 29%. And for most part of the week, total market volume was above the 40 days Volume Moving Average; it appeared to be some selling pressure. However, if the market volume were to hold up above 40 day VMA with KLCI support above the L2 support, we shall see a brighter outlook for KLCI. (Refer to B) 

MACD

Since the MACD line has gone above the zero level, we generally interpret this as the over-all market sentiment is still positive. MACD histogram was showing sign of “round-top” and has confirmed the correction of the recent up run of KLCI. We shall see and end of the correction when MACD histogram shows a “round-bottom”. (Refer to C) 

WinChart RSI:

Due to the market correction, WinChart RSI has once again drop slightly below the 70% level, and entered the mid-term neutral zone. On the brighter side, RSI remained very close to the 70% level, and if we see RSI turning up and above the 70% level again, after the correction, KLCI upward potential is still intact. None the less, if KLCI were to go side-ways, RSI would be moving around the 50% level, thus reducing its significant.(Refer to E) 

Stochastic:

Needless to say, the sensitive %K of Stochastic has broken down the 70% level and entered the short-term neutral zone. Technically speaking, since the %D is still lagging behind, standing above the 70% level, we can still say that the short-term sentiment is still cautiously bullish. However, if %D drops below the 70% level, it gives a confirmation that the short-term bullish sentiment has ended. (Refer to D) 

In the Nut-Shell:

Overall for the week, KLCI was considered a correction to last week’s rally. Since the gap that happened on last Wednesday has been filled, (Refer to G) and if KLCI were able to hold up well above the 890.8 Fibonacci and the L2 support, this week’s correction might very well just be another preparation for the next run. Anyway, we have no confirmation until Bollinger Bands opens.

Copyright 1997-2005 Straits Index (M) Sdn. Bhd.