The FBM KLCI’s current technical posture suggests that the key index could be cracking the peak of the 2009-2010 rally soon. The peak is situated at the 1,350 pt-level and the market is now very close to it. In fact, the futures index has surpassed the peak of the 2009-2010 rally last Friday. Remember there were three failed breakout attempts at the 1,350 pt-level during the March-May period. It is amazing that the FBM KLCI could actually return back to the current level after having experienced a major technical breakdown by violating the “Neckline” support line.
Similar to the recent rebound back above the “Neckline” experienced by the palm oil futures market, the FBM KLCI is also experiencing something very unusual. Firstly, the breakdown from the “Neckline” of the “Triple Top” is supposed to be a very reliable mid-term reversal pattern which would normally lead to further downside. However, the downdraft following the breakdown was brief and the retracement was only about 100 pts off the 1,350 pt-peak. Secondly, the FBM KLCI has been actually trending against the DJIA in a major way since last month. While the DJIA continued to trend lower within a broad downtrend channel, the FBM KLCI continued to go higher. Last but not least, the DJIA did look like it is in the process of creating a major “Head and Shoulder” bearish formation. The combination of these three factors has kept us maintaining our near-term bearish bias view for quite a while despite the fact that the FBM KLCI is obviously trending up.
We will now see if the FBM KLCI can violate the 1,350 pt-level. We are dropping our bearish bias view now. The rebound starting from the May low was actually not a bear rebound as we had been expecting. This is the second time since March 2009 that a major breakdown experienced by the FBM KLCI did not lead to the kind of sharp decline that we normally saw in the past. To re-cap, the first violation of the critical 50-day MAV line in February this year also did not cause the FBM KLCI to retrace drastically from the moving average line.
From the current level, there is a tough resistance at the 1,350 pt-level. Next hurdle would be the 1,395 pt-level while initial support is still situated at the 1,332 pt-level, followed by the 1,326 pt-level.
Similar to the recent rebound back above the “Neckline” experienced by the palm oil futures market, the FBM KLCI is also experiencing something very unusual. Firstly, the breakdown from the “Neckline” of the “Triple Top” is supposed to be a very reliable mid-term reversal pattern which would normally lead to further downside. However, the downdraft following the breakdown was brief and the retracement was only about 100 pts off the 1,350 pt-peak. Secondly, the FBM KLCI has been actually trending against the DJIA in a major way since last month. While the DJIA continued to trend lower within a broad downtrend channel, the FBM KLCI continued to go higher. Last but not least, the DJIA did look like it is in the process of creating a major “Head and Shoulder” bearish formation. The combination of these three factors has kept us maintaining our near-term bearish bias view for quite a while despite the fact that the FBM KLCI is obviously trending up.
We will now see if the FBM KLCI can violate the 1,350 pt-level. We are dropping our bearish bias view now. The rebound starting from the May low was actually not a bear rebound as we had been expecting. This is the second time since March 2009 that a major breakdown experienced by the FBM KLCI did not lead to the kind of sharp decline that we normally saw in the past. To re-cap, the first violation of the critical 50-day MAV line in February this year also did not cause the FBM KLCI to retrace drastically from the moving average line.
From the current level, there is a tough resistance at the 1,350 pt-level. Next hurdle would be the 1,395 pt-level while initial support is still situated at the 1,332 pt-level, followed by the 1,326 pt-level.
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