Dow to the overnight rally of the Dow Jones Industrial Average, the KLCI opened higher on Tuesday, but ended lower with a lost of 0.38 points. Since the KLCI failed to break above 885 WinChart Automatic Fibonacci Retracement, the 885 level is still the resistance for the KLCI while the supports are at 869 WinChart Automatic Fibonacci Retracement and the Bollinger Middle Band dynamic support.

As circled at A, the KLCI is now above the Bollinger Upper Band, which signaled an over-heated condition. Therefore, the KLCI is likely to have a pull-back effect as a form of technical correction.

As indicated by B, total market volume increased 1.8%, while still above 40-day VMA level. This shows that the market is still active. However, the increased of volume on Tuesday with the KLCI ended lower suggested some selling pressure for investors are taking profit. Nevertheless, if the volume should remain above the 40-day VMA level after its technical correction, there is a good chance for the KLCI to resume its short term rally.

As circled at C, the Stochastic breaks below 90% level, suggesting a risk of a technical correction, as the KLCI was over-heated. If the Stochastic should should break below 70% level, it would have ended the short term bullish signal. In other words, the Stochastic has to maintain above 70% level to sustain its short term bullish signal.

With the pullback effect due to take place, the first target of the technical correction is at the Bollinger Middle Band. If the KLCI should be supported by the Bollinger Middle Band after its technical correction, the positive movement of the KLCI is likely to resume.

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