Composite Index Weekly Technical Analysis 01/07/2005

Main Chart:
For the week ended on the 1^st of July 2005, KLCI lost 4.06 points and closed at 894.02 points. Ever since KLCI failed to break out the 906 resistance point, KLCI has been trading in a narrow range for the entire week. At this moment, resistance for KLCI remains at the 906 points while the immediate support is located at 888.29 WinChart Automatic Fibonacci Retracement. Further support would be at the 860 level.

Bollinger Bands:
For the past week, KLCI were trading below the middle band, and has been baring the downside risk; especially on Thursday where the Bollinger Bands opened 14%. As a result, the immediate outlook for KLCI is negative bias. Currently, Bollinger Middle Band serves as the dynamic resistance for KLCI.

Volume:
Total market volume for the week stood at 18.505 million lots. Obviously, total market volume has been shrinking if compared to the previous week where the daily volumes were below the 40 days VMA. This is a sign of low participation in the market, and it is rather normal to have a lower volume during a consolidation phase. (Study B)

MACD:
MACD issued a “SELL” signal on Wednesday with the MACD line crossing below the trigger line. The “SELL” signal remains intact, but however, if KLCI were going to go sideways again, the significant of the signal is reduced. Nonetheless, MACD line remains above the zero level, and so, the overall market sentiment remains cautiously positive.

WinChart RSI:
Ever since KLCI broke below the 900 psychological level, WinChart RSI has been moving gradually lower from the mid-term bullish zone to the neutral zone. At the moment, RSI is positioned at slightly above the 50% level, thus suggesting that the mid-term outlook for the KLCI is neutral with a slight positive bias. (Study C)

Stochastic:
% K of stochastic had touched the zero % level on Wednesday as well as Thursday. As a result, it triggered a technical rebound for KLCI. Nevertheless, %D remains below the 30% level, which is interpret as the short-term bearish zone. (Study D)

Weekly DMI: ** (Please refer to your weekly Chart)
We see a rather positive signal from Weekly DMI where the +DI crossed up the -DI. Please take note that although the ADX is staying flat at a lower level, it gives a strong potential for whatever directions to come. In other words, if we see the ADX moving higher while the +DI is still above the -DI, this would suggests another bull market. Therefore, it pays to study the weekly DMI at this critical stage.

In the Nut Shell:
In technical analysis, we often see conflict of signals from different indicators, especially the secondaries. The conflict of signals usually occurs during a sideways or an unclear market condition. Therefore, it is not a bad idea at all to stay sideline while studying the market closely for the next possible move. For the readers who had not given any thought about this matter, the risk associated with such unclear market direction is surprisingly the highest. We all agree that there is always risk in trading, and we could reduce our risk by learning the golden rule – Never Go Against the Market.

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