Composite Index Weekly Technical Analysis, 10/06/2005 

Main Chart:   Since touching the support line at 860 on last week, KLCI rebounded strongly for this entire week. Total gain for this week was 24.14 points or 2.8%, closing the week at 890.02 points. On Friday, KLCI attempted to break out from the T1 descending line, which is the resistance line of the descending Triangle, but failed and closed precisely at 890.20 points of the WinChart automatic Fibonacci Retracement.

            At the moment, KLCI’s resistance is at the Fibonacci 890.20 as well as the T1 dynamic resistance. As for the support, it is still located at T1, or the 858.84 points of the WinChart automatic Fibonacci Retracement. (Refer to A) 

Volume:            Total market volume for the entire week was relatively strong, with all five trading days’ volume higher than the 40 days VMA. This shows that the market for the week was very active. Needless to mention, if KLCI would like to continue its rally, volume staying above the 40 days VMA is a must. (Refer to B) 

Bollinger Bands:            Ever since the KLCI rebounded on Monday, 10 days Bollinger Bands was contracting, thus showing that the KLCI was indeed consolidating. With the KLCI situated above the middle band, Bollinger Bands reopened 14% on Thursday, and followed by Friday’s 34%. Although there are signs of possible technical correction, market sentiment remains bright provided the KLCI is still above the middle band.

 MACD:            MACD gave a Buy signal on Wednesday with the MACD line crossed above the trigger line. For the week, MACD has turned slight brighter with the MACD line slanting higher and closer to the zero line. If MACD line breaks above the zero line, it shows that the long-term market sentiment is turning brighter.(Refer to C)

 WinChart RSI:            Despite the Bollinger Bands and MACD showing positive signals, WinChart RSI remained neutral. WinChart RSI managed to steer away and above the 30% mid-term bearish level to neutral zone. Currently, WinChart RSI is at 50% level, suggesting that the mid-term market sentiment is neutral. (Refer to D)

 Stochastic:            %K of Stochastic had moved away from the 30% level, and since then, it has touched the 100% level on Wednesday and now situated slightly above the 90% level. %D followed and confirmed the %K, suggesting a short-term bullish sentiment. As long as Stochastic stays above the 70% level, short-term market outlook will remain bright and expect more upside movement for the KLCI. (Refer to E)

 DMI:            In spite of the KLCI’s strong move for the week, DMI was showing neither confirmation nor any signals of bull. On Friday, the +DI cut across the –DI by a fraction, but since the ADX is staying flat on top, there is no clear signal of Bull market in the immediate term. Even if there is bull signal from the +DI, it would be a weak bull since there is more downside potential for the ADX. (Refer to F)

 Momentum and OBV:            Both Momentum and OBV were pretty much converging with the movement of the KLCI, therefore there is nothing significant to mention about. However, to help you minimize your trading risk and maximize your wining probabilities in the game of trading, it pays to monitor these indicators for they will give you early warnings if abnormal movement is detected.

 In the Nut Shell:            Overall KLCI seemed to have a attractive week with a decent gain. However, due to the formation of a possible descending triangle chart pattern, we suspect the KLCI is likely to have a technical correction for early next week. Nonetheless, technical indicators were giving conflict signals thus suggesting that the market is not entirely bullish yet. Provided the KLCI stays above the Bollinger Middle Band, we might see another opportunity coming right at the corner not too far away. In contrast, if the KLCI fail to hold up above the Bollinger Middle Band, watch out for a possible downside break out of the triangle, which will grant the KLCI to fall further.

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