KLCI Futures to See Further Consolidation

(Source: New Straits Times)By Bernard

THE Kuala Lumpur Composite Index (KLCI) futures spot month contract on Bursa Malaysia Derivatives closed at 1,024.50 with an open interest of 20,194 contracts last Friday.

Trading in the September contract was largely uninspiring in the absence of a strong catalyst and the commitment of traders to take large positions. Trapped within the 1,040-1,010 range, trading was dominated by short-term traders and scalpers. With only a four- point premium to the cash index, the September contract is preparing itself for expiration this week.

The long-term weekly chart is still not favourable given the clear absence of constructive momentum in the past weeks. The declining weekly chart reflects poor bullish interest despite the market having broken key support levels with the exception of the 1,000 psychological point, where it managed to stage a technical rebound.

Without a clear indication of buying support at the current level, there is a fear that the momentum erosion will continue to drag sentiment unless a positive catalyst presents itself.

The daily chart is slightly more vibrant, with a series of peaks and troughs signalling the constant bargaining between buyers and sellers. Having ended with a hook-down angle on the daily Relative Strength Index (RSI) and the Commodity Channel Index (CCI) last Friday, the commitment of the bullish traders is once again put to the test. Shortists will argue that the futures contract will always end the week weaker because of the uncertainty over the weekend. Though there is some truth to this, it has not been proven to have occurred consistently.

The recovery in the Moving Average Convergence Divergence (MACD) indicator is one argument why sentiment might be better slightly this week. With a shorter trading week, however, the extent of the recovery may be held back. Given the mixed signals in the technical signals, the market may this week trade within the support and the resistance boundaries.

Tactically this week the market may continue with its consolidation pattern. The trading range will be shorter with key support and resistance at 1,010 and 1,030 respectively.

Technical readings

The RSI closed at the neutral region.

The CCI indicator closed at the neutral territory.

The MACD indicator remains in the negative territory with the faster average above the slower.

bernard@tactician.com.my

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

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