Composite Index Weekly Technical Analysis, 22/07/2005
For the week ended on the 22nd of July 2005, KLCI gained a total of 22.85 points, ended with the weekly high at 989.69 points while the weekly low was at 913.55 point on Tuesday.

Main Chart:
KLCI was trading in an ascending wedge for most of the week and break out strongly above the ascending wedge on Friday due to the news of the Ringgit un-peg with the US dollar.
On Friday, KLCI opened gapped up at 938.1 points and soon KLCI was heading downward for the morning session where it filled up the gap and rebounced strongly at the W1 dynamic support and closed the Friday trading with a hammer candlestick.

As a result, immediate support for KLCI is at W1 dynamic support while the resistance is at the all-important 940 psychological resistance level. Mean while, while KLCI is still resisted at 940 level, it would form a double top for the year of 2005 if KLCI fail break above at this level.

Bollinger Bands:
Using 20 days Bollinger Bands, we see that KLCI Friday's candlestick was away and above the upper band. This is a sign of over-heated market condition in which a pull-back effect will happen, thus signaling market for a consolidation or a technical correction. (Study A)

Volume:
Despite the robust performance of KLCI this week, total market volume for the week ended on the 22nd of July 2005 stood at 25.377 million lots, which was a 8% decrease compare to the the week before. Basic requirement for the market volume to be higher than the 40 days VMA was met on Friday, although not a substantially convincing amount of volume to support such break-out on Friday. (Study B)

MACD:
MACD line had been trending higher above the zero level suggesting the long term market sentiment has been, and is still positive. While no selling signal is trigger, MACD histogram has signaled an end of the technical correction happen at the earlier part of the week. (Study C)

WinChart RSI:
WinChart RSI has been converging with the KLCI's movement, and at the moment, situated abov the 70% level, which is the mid-term bullish zone. As long as WinChart RSI stays above at the level, market sentiment for the mid-term is still bullish. (Study D)

Stochastic:
For more than two weeks, Stochastic has been moving between the range of 70% - 100% level, which is the short-term bullish zone. This suggests that the market sentiment was bullish. However, on Friday, %K of Stochastic had reached the 100% level, signalling an over-bought market condition; therefore, it would trigger some profit taking activities thus a technical correction is due to happen. Anyway, provided Stochastic stays above the 70% level, no change of market sentiment. (Study E).

Weekly DMI (please refer to weekly chart):
Signal of the weekly DMI is getting better with the ADX slightly pointed higher. Nonetheless, +DI is still moving higher at a healthy momentum, and as long as the +DI is still moving higher, market trending is still bullish.

In the Nut Shell:
While the news of the Ringgit un-peg with the US Dollar had given the market an incredible boost, KLCI's movement before Friday was rather showing signs of decreasing of momentum because of the ascending wedge pattern. The opening gap on Friday had created a long lower shadow for its candlestick, which suggests a conflicts of interests; therefore, couple with the 940 resistance, we expect a correction for KLCI, with the exception of two conditions: stronger volume on the coming trading days and a break-out above the 940 level.

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