For the week ended on the 5th of August 2005, KLCI gained 6.02 points closing at 943.41 points with a weekly high at 953.88, and a weekly low at 935.56. Total volume for the week stood at 28.49 million lots.

Main chart:
KLCI broke out the 940 psychological resistance level on with a daily gain of 11.26 points on Wednesday. This break out also leads to the 62 months new high for KLCI. Therefore, immediate support for KLCI stands at 940 levels while the next support level for KLCI can be found at the 10 days Bollinger Middle Band dynamic support.

After the break out on Wednesday, KLCI pulled back for a technical correction due to profit taking. Nevertheless, KLCI is now still above the 940 level. If the KLCI was to maintain its position above this level, more upside movement is promising after the consolidation. (Study A)

Bollinger Bands:
10 days Bollinger Bands contracted on Thursday and Friday after the break out. This suggests that the KLCI is consolidating and the volatility for KLCI is relatively lower. Nonetheless, since KLCI is positioned above the middle band, immediate out look for KLCI remains positive.

Volume:
Total market volume for the entire week stood at 28.49 million lots, a mild gain of 11.9% from the previous week's total volume. Market volume on Wednesday was rather strong for it was the highest daily volume ever for the year 2005; this give a strong support to the break out of the 940 as well. Anyway, we saw volume pulling back after the break out due to market consolidation. (Study B)

MACD:
For this week, we saw the MACD histogram getting lower, due to the decrease of the distance between the MACD line and the trigger line. As a result, MACD triggered a sell signal on Friday. This sell signal is the first warning of the weakness of KLCI for it could leads to a reversal of trend. Since the Bollinger Band is contracting, the significance of this sell signal is slightly reduced. Anyway, if the KLCI failed to stay above the 940, it would confirm the MACD sell signal.

WinChart RSI:
WinChart RSI was not entirely converging with the recent upward movement of KLCI. Infact, it is still showing a bearish divergence to the KLCI. Therefore, it creates doubts for the rally. Anway, it is best to have the WinChart RSI above the 70% level to signify the mid-term bullish market sentiment; until then, the current RSI reading suggests a mild bullish to neutral market sentiment. (Study C)

Stochastic:
%K of Stochastic suggests an end of the short-term bullish sentiment. This is a first warning signal for the %D has not confirm such signal. Anyway, if the KLCI was to consolidate or going sideways, Stochastic could be wandering around the 50% level thus generating noises that need to be ignored, or rather insignificant. (Study D)

Weekly DMI: (please refer to your weekly chart)
Despite the break out on Wednesday, Weekly ADX was not showing any support to it. Even though the +DI continued to move higher, ADX was giving no confirmation for any strong bull market.

Momentum:
Although no conventional buy or sell signals can be clearly detected on Momentum indicator, it is rather effective in detecting any divergence signals. As shown in E, a bearish divergence suggests the weakness of KLCI after the break out.

In the Nutshell:
KLCI indeed break out above the important 940 level, and although with a pull back after the break out due to profit taking, KLCI remained supported by the 940 support. KLCI is likely to have a consolidation, and it is best, in our opinion, to see KLCI consolidating above the 940 before attempting a rally again, or else, a break below the 940 level could suggests an end to the recent rally, due to a bearish divergence signals in Momentum, as well as a sell signal from MACD. 

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