Composite Index Weekly Technical Analysis, 17/06/2005 

The Composite Index breached above the T1 on Monday and since then, it has been staying above the T1 dynamic support line. Technically speaking, KLCI has already break out from the descending triangle and the break out has confirmed to be true. Anyway, KLCI is now resisted at the 899.89 WinChart automatic Fibonacci Retracement line, which is also the 900 psychological level and at the mean time supported by the 890.20 WinChart automatic Fibonacci Retracement line. For the week, KLCI closed 7.04 points higher at 897.06.

Bollinger Bands:        For the entire week, KLCI was advancing above the 10 days Bollinger Bands middle band. Band width contracted on Thursday and Friday thus signaling that the KLCI was going through a technical correction. Nevertheless, KLCI is still above the middle band and therefore the market outlook remains positive.

Volume:                      In general, KLCI was advancing. Total market volume, on the other hand, had been going to a contrary direction in which signaled a bearish divergence. Therefore, the market force was highly in doubt. Anyway, since the market is consolidating, and it is rather normal for market volume to be lower. However, if KLCI were going to have a second round rally, total market volume is required to be above the 40 days VMA. (Refer to B)

MACD:                      With the positive market movement from last week and this week, the MACD line managed to climb above the zero level thus showing market confidence is back again. MACD histogram shows a “round-top” signal suggesting a correction for the KLCI. As long as the MACD line stays above the zero line, a “round-bottom” signal from the histogram shall signal a second round of the rally. (Refer to C)

WinChart RSI:           WinChart RSI entered the mid-term bullish zone on Wednesday. As long as the WinChart RSI stays above the 70% level, we shall expect more upside room for the KLCI. However, a prolong consolidation of the KLCI would send the RSI back to the neutral zone, for this is the normal reaction of any oscillator indicator.

Stochastic:      Stochastic was showing sign of strength, thus market short-term sentiment remains bullish. Stochastic was already at the over-bought zone, and it is a common sense to have a correction. Nonetheless, as long as Stochastic stays above the 70% level, market outlook for the short term remains bright.

DMI:                          Although +DI signal a bullish signal last Friday, ADX gave not confirmation of such signal thus the strength of the signal was weak. For the bright side, if the ADX turns upside after the correction, we shall see a more promising bull signal.

In the Nut Shell:         Since the descending triangle was breached, and therefore, we expect the KLCI to move a way from the triangle. In our opinion, a technical correction is overdue and it is only healthy to have a side-ways consolidation before we see another possible rally for KLCI. Until then, Bollinger middle band would be a good indicator to watch out for.  

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