Market Outlook as at August 25, 2010

Our FBM-KLCI is displaying the same pattern that we saw in the last quarter of 2007 & first month of 2008 (which I have denoted as 'X'). Back then, the index had a parabolic rise that culminated in a V-shape reversal. We may be witnessing a steady build-up of a parabolic rise over the past few weeks- with the promise of the blow-off stage to come. No one know how long & far this rally can go. However, we know from historical records that parabolic rises culminate in sharp falls. Notice how the MACD & RSI have both broken above their downtrend line (denoted as 'Y'), just like in the last quarter of 2007 (denoted as 'X'). This market may correct & rise again. Like a shooting star, the market may rise until it can rise no more. Be very careful...


Chart: FBM-KLCI's daily chart as at Aug 24, 2010 (Source: Tradesignum)