Window-dressing activity

REVIEW: Riding on the strength of the futures market, Wall Street stormed back on renewed buying spree in the blue chips, pushing the Dow Jones Industrial Average up 494.13 points, or 6.54% to 8,046.42 the previous Friday, boosted by news report that President-elect Barack Obama has chosen his key person to combat the US economic crisis, instilling confidence about the administration’s ability to take action.

Over on the New York Mercantile Exchange, a modest rebound of 51 cents in global crude oil prices to US$49.93 a barrel also added spark to the rally.

Given the positive sentiment from the US, many people had expected Asian markets to kick off the week on a firm platform but it turned out otherwise amid lingering concerns over the global economic climate.

On the domestic front, share prices on Bursa Malaysia opened easier, with the bellwether Composite Index (CI) down 3.56 points to 863.32 on profit-taking selling action.

Trading was slow, as most investors stayed on the sidelines adopting the “wait-and-see” attitude while the regional bourses extended their downward momentum during the day on continuous liquidation.

In the absence of support from investors, the local market subsequently drifted to an intra-day low of 854.44 before bouncing off slightly in late hour to end at 855.39, down 11.49 points, or 1.33% on Monday.

After the bell, Bank Negara lowered its benchmark Overnight Policy Rate (OPR) by 25 basis points to 3.25%, the first reduction in more than five years.

It was a common knowledge that any rate cut should bode well for equities. Compounded by another steep advance in overnight Wall Street, which witnessed the Dow leaping an extra 396.97 points, or 4.93% to 8,443.39, they encouraged investors to look for value buys, thus leading the local bourse firmer in early deals the next day.

However, the upside was limited. Though certain blue-chips managed to chalk up handsome gains, sustained profit taking pressure elsewhere weighed on the market.

Hence, in mixed note, Bursa Malaysia languished within a moderate band throughout, with the key index rebounding 4.79 points, or 0.56% at 860.18 on Tuesday.

Come Wednesday, market sentiment was very much the same, with the CI locked within a moderate range once again. But unlike the previous day, it flirted in the negative territory on consolidation, as a wobbly overnight Wall Street prompted the local boys to exercise care in their approach.

A sharp reversal in world crude oil prices to US$50.77 from US$54.50 a barrel was another dampening factor.

In sluggish session, the local bourse shed 3.81 points to 856.37 in mid-week.

Nevertheless, after three days of unclear pattern, the underlying sentiment of the market changed for the better, as a solid rise in offshore equities amid fresh signs of easing global credit crunch enticed institutional investors to indulge in bargain hunting activity.

Blue chips topped the winners list, propelling the CI 13.61 points higher to 869.98 on Thursday.

Thereafter, the market turned range-bound due to lack of fresh leads on the horizon, with the overnight US markets shut for Thanksgiving holiday.

Quality issues led declines, pulling the CI down 3.84 points in lacklustre trade yesterday.

Statistics: Week-on-week basis, the key index was little changed, down 0.74 of a point to 866.14. It hit a weekly high and low of 869.57 and 848.03 respectively, giving investors a 21.54-point range to trade.

Total turnover for the week stood at 2.591 billion shares valued at RM3.563bil versus 2.881 billion shares worth RM3.386bil a week ago.

Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index strengthened further after flashing a short-term buy at the oversold area on Thursday.

Also, the daily moving average convergence/divergence (MACD) histogram were showing a resumption of an upward expansion against the daily trigger line to retain the buy signal.

In stark contrast, the 14-day relative strength index had indicated a mild hooking down pictogram from a reading of 46.5 points after the recent surge.

Weekly measurements were looking better, with the weekly slow-stochastic momentum index extending the scale from the neutral zone to the mid-range and the downward trend of the weekly MACD pausing.

Outlook: As expected, Bursa Malaysia traded sideways again on bargain-hunting nibbling alternated with profit-taking selling activity the past week.

It looks like the local market has stabilised since sailing out of the turbulent waters in September and October but it is still too early to say equities have actually bottomed out.

Nevertheless, December is traditionally a promising month, where one will see some “window-dressing” activity, particularly in the index-linked counters, a strategy practiced by most fund managers to spruce up their portfolio before presenting it to clients or shareholders for consideration.

However, with the prevailing global uncertainty clouding the marketplace, they may be less aggressive this time around, but their action should be enough to at least cushion the downside, if not pushing the market higher in the immediate term.

Based on the daily bar chart, the principal trend of the market still is bearish and it will remain so, as long as the mid-term descending line, resting at approximately 940 points and still falling, is intact.

Technically, indicators are on the mend, implying the local bourse is likely to channel sideways, but with an upward bias due to easing credit crunch worries.

Support is anticipated at 848 points, 820-822 points band, followed by 801.27, which is the recent bottom.

To the upside, resistance can be expected at the 14-day simple moving average (SMA) of 873, the 21-day SMA of 881, the 900 points psychological level and the next, at 926.65 points.

Source : The Star