As indicated by A, despite the sharp fall of the Dow Jones Industrial Average, the KLCI only lost 6.45 points or 0.7% on Wednesday. The retreat of the KLCI is considered healthy as no sign of panic selling is seen. We can see from the decline of volume (-27.1%) suggesting that the selling was rather mild. Since volume is now back to below the 40-day VMA level, the market participation is now on the lower side, which is a sign of a consolidation. Therefore, the increased of volume is a must if the KLCI should resume its rally. (Study B)

As shown on the chart above, the Bollinger Bands Width only expanded 4% on Wednesday, compared to previous 48%. If the Bollinger Bands Width should contract, it would be a signal suggesting a consolidation for the KLCI, and the first target of the consolidation would be the Bollinger Middle Band.

As circled at C, the Stochastic retreated after hitting 100%, but still above the 70% level, which means that the short term bullish signal is still intact. If the Stochastic should break below 70% level, it would be a signal suggesting a beginning of a technical correction.

To sum up, it is rather normal for the KLCI to have its correction after rallied for 3 days, and if the KLCI should find its support above the Bollinger Middle Band after this correction, there is a chance for the rally to resume. If the KLCI should break below the Bollinger Middle Band, it would end the short term bullish biased movement. Nevertheless, other supports for the KLCI are still at 885 and 887 WinChart Automatic Fibonacci Retracement while the immediate resistance is at 905 WinChart Automatic Fibonacci Retracement.

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