FBM KLCI futures: Consolidative pressure ahead

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index futures October contract on Bursa Malaysia Derivatives closed higher at 1,265.50 with an open interest of 15,521 contracts last week.

The performance for the spot contract came within our expectation. Test of the resistance at 1,280 was not rewarded with an extension but instead drew some selling pressure at the peak at 1,273.50. The inability of the index futures market to sustain the momentum to carry trades beyond this level suggests that a technical revision is due.

As the cash index underwent an upward rebound to the close at 1,267 last Friday, a 2-point premium over the October contract, it may mean that returning interest from the bulls will be slow and uninspiring. The reluctance of the bulls to commit further at the peak resulted in the technical indicator stalling at the neutral region after rebounding from the base of 1,253.

A firm recovery has yet to kick in with the presence of the spinning top candlestick pattern on last Friday's chart signalling that work is still in progress as the index futures market may slip into consolidation mode.



The daily Moving Average Convergence Divergence (MACD) indicator is showing a normalised pattern after its positive crossover two weeks ago. This will have a slowing effect on the rising trend line on the weekly chart, although its primary pattern remains largely upward bound.

Tactically for this coming week, any follow-through rebound is likely to encounter headwind. Under this setting, the spot contract may be compel to stay defensive only at lower support levels with the first at 1,250. Ability to hold above this level may draw some bullish interest.

However, we are more likely to see consolidative pressure in the market to keep the spot within the ad hoc 1280 - 1,250 band.

Technical outlook

The Moving Average Convergence Divergence indicator remains positive with the faster below the signal line. Both lines remain at the positive region.

The daily Relative Strength Index closed at the neutral .

The daily Commodity Channel Index finished at the neutral.

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.