Due to the biggest daily fall of the Dow Jones Industrial Index, the KLCI opened gap down below the Bollinger Lower Band. Soon, the KLCI began to rebound and at the close, it had filled up the opening gap as indicated by A. The KLCI attempted to test the Bollinger Middle Band on Tuesday, but again failed. Therefore, the Bollinger Middle Band is still the dynamic resistance for the KLCI.

Since the KLCI break below the Bollinger Middle Band, the immediate outlook for the KLCI is now turning negative. This is because if the Bollinger Bands Width should re-expands with the KLCI below the Bollinger Middle Band, it would be a bearish movement signal for the KLCI, and the Bollinger Middle Band would continue serving as the dynamic resistance. However, with the Bollinger Bands Width still contracting, the KLCI is expected to continue its consolidation.

As indicated by B, total market volume increased 43.3% on Tuesday, suggesting some bargain buying activities, which caused the KLCI to rebound. If the KLCI should continue to rebound with the volume maintaining above the 40-day VMA level, the KLCI would have a better chance to regain some lost ground. However, if volume should fail to sustain above the 40-day VMA level, the weaker market sentiment is expected to continue.

As circled at C, the MACD histogram is still rising while no rounding top is sighted yet. If the MACD histogram should form a rounding top, it would be a signal suggesting a weakening short term movement for the KLCI.

Find this analysis useful? Why not share it with others? Click Here to send this to a friend

Straits Index (M) Sdn Bhd
No. 16, Jalan LP 1A / 5, Lestari Perdana,
43300 Seri Kembangan, Selangor
Hotline: (03) 8941 6828  (5 lines)   Fax: (03) 8941 9828    
Email: info@straitsindex.com
© Copyright 1997-2008 Straits Index (M) Sdn Bhd All rights reserved