Market Outlook as at March 15, 2010

The FBM-KLCI failed to surpassed the resistance posed by the expanding triangle ('ABCD') at 1325-30. The ensuing correction over the past 3 days has been fairly sharp. In fact, when we look at the current bull market which started in March last year, there were only 4 occasions when the market underwent a correction as severe as the current one. They are the correction lasting 3/4 days that started on April 27 & August 17 last year and the market consolidation lasting about 3 weeks that started on June 16 last year & January 22 this year. I believe the current sharp correction falls under the category of correction lasting a few days, which in the past two incidences has found support at the 20-day SMA line. If the same were to recur this time, then we can expect FBM-KLCI to find support at about 1292 level.

However, one would note that the close of FBM-KLCI today (at 1299.67) is fairly bearish as it has broken below the resistance-turned-support of 1308 (accorded by the high recorded on January 21 this year) and the psychological 1300 level (albeit only marginally). Besides the support from the 20-day SMA line, the FBM-KLCI may find support at the resistance-turned-support of 1288 (accorded by the high recorded on November 17 last year) as well as support from the 50-day & 100-day SMA lines at 1280 & 1259, respectively.


Chart: FBM-KLCI's daily chart as at Mar 15, 2010 (Source: Quickcharts)

I believe the current sharp correction (with a loss of about 30-35 points) may not appear too excessive when one consider the prior sharp gain (of about 100 points from February 9 to March 13). The market could have been shaken by comment from BNM that further interest rate hikes is possible after its recent 25-basis-point hike.