Due to the overnight losses in the US markets, as well as the negative performance of the regional markets, the KLCI profit taking activity continues on Tuesday, with the KLCI losing 10.48 points or 0.7%. Despite the retreat, the uptrend of the KLCI remains intact. As indicated by A, the KLCI is now testing the 14, 21, 31 EMA dynamic support, and as the same time staying above the L1 uptrend line.

As indicated by B, total market volume increased 16.9%, but still below the 40-day Volume Moving Average. This suggests that the market is still relatively quiet, as investors are taking extra caution, amid worries of the Italian debt crisis.

As indicated by C, the Stochastic fell below 70%, which ended the short term bullish signal. At the same time, the Stochastic has triggered a short term technical correction signal. If the Stochastic should break below 30%, it would be a short term bearish signal for the KLCI.

In conclusion,despite the technical correction, the losses of the KLCI is still relatively smaller if compared to the Hong Kong and Taiwan market. Nevertheless, the retreat does not change the positive technical outlook of the KLCI, unless the KLCI should break below the L1 uptrend line, or form a Lower-High, which would be a sign of weakness.