As lead by the overnight gain of the Dow Jones Industrial Average, the KLCI continued to rebound on Wednesday, gaining 12.31points or 1%. Support for the KLCI is still at 1233, while the resistance is at 1250 WinChart Automatic Fibonacci Retracement as well as the Bollinger Middle Band dynamic resistance. (As indicated by A)

As shown on the chart above, the Bollinger Bands contracted another 19%, this suggests that the KLCI is still consolidating, and the Bollinger Middle Band is the target of the consolidation or the technical rebound. If the KLCI should break above the Bollinger Middle Band, there is a chance that it would break away from the current negative biased trend. However, if it should failed to break above the Bollinger Middle Band, the immediate outlook for the KLCI shall remains bearish biased.

As indicated by B, total market volume declined 20.4%, despite the KLCI gaining over 12 points. As a result, total market volume is still below the 40-day VMA level, which suggests that the overall market participation is still weak. Therefore, the KLCI is less likely to pick up any strength.

As circled at C, the Stochastic breaks above the 30% level; this is a signal suggesting a beginning of a technical rebound. If the Stochastic should continue rising, the rebound of the KLCI is expected to continue. However, in order for the KLCI to regain its positive position, the Stochastic has to break above and remain above 70% level.

In conclusion, the KLCI had a technical rebound, but has not shown a sign of a reversal yet, due to the Bollinger Middle Band dynamic resistance remains intact, as well as the lack of market volume. Nonetheless, if the Bollinger Bands should continue to contract, the consolidation of the KLCI is expected to carry on, until the re-expansion of the Bollinger Bands. Then, the new movement of the KLCI shall be determined by the relative position of the KLCI above or below the Bollinger Middle Band.

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