FBM KLCI futures:Bears in ongoing tussle with bulls

Published: 2009/09/28

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) futures spot month contract on Bursa Malaysia Derivatives closed unchanged at 1,221.50 last Friday with a higher open interest of 14,843 contracts.

Moving beyond the technical resistance line at 1,220, the futures contract has remained supported above this level on a weekly basis. Consolidation ruled for the most part of last week only to be interrupted by profit-taking opportunity which dragged the spot contract to a low of 1,210.50 before it recovered and ended on a flat note.

As the cash index underwent a correction from last Wednesday, returning interest from the bullish side was slow and uninspiring. The reluctance of the bulls to commit further at dips has resulted in the technical indicators turning consolidative at best while shorter term signals have remained largely unchanged. Firm recovery has yet to kick in with the technical indicators undergoing work in progress before easing to the oversold region. Technical oscillators are emitting mixed signals with the direction of the indicators diverging.

The Moving Average Convergence Divergence (MACD) indicator is slowing down after the positive crossover spotted in the previous week. This will have a complicated effect on the rising trend line on the weekly chart despite the primary pattern remaining largely unscathed. The dichotomy runs deep as the secondary trend persists with an adjustment which if left unchecked will have dire consequences on the overall trend.

Tactically for this week, the consolidation will continue. Bears are still in a tussle with the bulls, who have become subdued. Under this setting, the spot contract may be compelled to stay defensive only at lower support levels with the first at 1,210. Ability to resist this stopover may then see consolidative pressure in the market to keep the spot within the 1,240 to 1,210 band.

Technical reports

The MACD indicator remained positive with the faster above the signal line. Both lines remain at the negative region.

The daily Relative Strength Index closed at the overbought.

The daily Commodity Channel Index finished at the overbought.

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.