KLCI hits its best-ever level

KLCI hits its best-ever level (STAR 29-10-2007)
Index poised to move into uncharted territory

Stock Market Signals: A weekly column on Bursa Malaysia's performance and outlook by G.M. Teoh
THE Kuala Lumpur Composite Index (KLCI) rallied and established fresh historic highs in late trading after an aggressive rebound from an earlier sell-off on Monday. It closed at its best-ever level.

The sudden turnaround in sentiment is attributed to expectation of another round of interest rate cut by the US Federal Reserve, record performance in the Hang Seng Index and most of the Asian exchanges, and recovery in the Dow Jones Industrial Index.

Crude oil prices that hiked to a record US$92.22 per barrel last Friday and renewed tension in the Middle East had no negative impact on the market last week.
At this juncture, traders are not too sure whether record crude oil prices would bring on worldwide inflation, topple the consumers, topple the economy and deal the death blow to stock markets worldwide.

Last week, the KLCI rebounded from an intra-week low of 1,339.36 points and rallied in late trading on Friday to close the week with minor gains at 1,398.35 points, up 28.18 points or 2.06% from the previous week.
Most of the main index-linked stocks ended the week with impressive gains and lifted the KLCI to fresh historic highs.

Maybank, IOI Corp, Public Bank, MISC, Genting, Digi.Com, Plus Expressways, KL Kepong, RHB Capital and MMC Corp all close with minor advances and contributed a combined 21.52 points to the index.
Bumiputra-Commerce and Tenaga Nasional ended up in the minus column and took away a combined 2.10 points from the index. Petronas Gas closed unchanged.

Weekly volume on the KLCI improved to 897.73 from 729.92 million shares the previous week. Daily average volume dipped to 179.55 million shares from 182.40 million shares previously.
The weekly candlestick chart ended the week constructive and called for the resumption of the upward momentum. A big white bullish candle occurred on Friday. This is generally considered a bullish pattern as prices closed significantly higher than they opened. The appearance of such a candle during a breakout above historic highs adds credibility to the upward breakout.

During the June-July period, the KLCI made numerous failed attempts to vault the strong psychological barrier at 1,400.00 points. With the chart outlook now constructive following Friday’s rally, the prospect of the index pushing above this chart hurdle is good this week.

Chart support for this week is adjusted higher to the 1,380.00-1,375.00 level. The current positive setting would fizzle if this level is violated.
A successful lift above 1,400.00 would take values higher to test its next chart resistance at the 1,422.00-1,430.00 level.

The daily technical indicators ended the week positive and signalled that the newly developed upward momentum could expand.
The daily stochastic triggered the short-term buy signal on Oct 24 and remained positive on Friday’s close. The oscillators per cent K and D ended the week sharply higher at 82.49% and 59.27% respectively.

The daily Money Flow Index (MFI) rose from the week’s low of 21.31 points on Oct 17 and finished sharply higher in the overbought zones at 83.13 points. Analysis of the MFI indicates that strong accumulation occurred last week.
The main trend-tracker 3- and 7-week exponentially smoothed moving average price lines (ESA lines) remained in bullish divergence and showed that the mains trend was still bullish.

Meanwhile, the short-term trend tracker 3- and 7-day ESA lines gave the buy signal on Oct 25 and remained constructive on Friday’s close. The 5-day RSI advanced from an oversold position and ended the week sharply higher at 77.29 points and signalled that things were slightly toppish