KLCI futures likely to trade lower

THE KLCI futures December contract on Bursa Malaysia Derivatives closed higher at 849.5 with an open interest of 24,360 contracts on Friday.

The December contract fell after its failure to remain above the 850 support line. This is not the first time and it certainly won't be the last that the current month trade around this band. The market has been volatile and this volatility is not going to end soon. The threat to sell is likely to drag the December contract lower this week, again with some optimism of a technical bound by the end of this month.

The technical signals continue to sway as traders are largely indecisive as to the direction of the market. The long-term trend remains southbound but a glimmer of optimism within the shorter-term trend is what is keeping the bullish traders in the market.

The oscillators once again retreated to the oversold level by last Friday as worries of further selldown could materialise in the local stock market early this week. Further selling pressure could depress these signals deeper into the oversold as some traders anticipate a fall to the 820 line before committing themselves.

Judging by the the sentiments and volatility in the market, it is evident that structural traders are less willing to commit than shorter-term traders. This may partly explain why the market could not sustain itself above the 850 line as more traders are more likely to cash in than to hang on to paper profits.

Tactically this week will not be any different than the past weeks as the contract will again try to consolidate its position. The December contract will gyrate within 840-870 as momentum may continue to ease. A deeper correction will induce more traders to bet on a technical rebound.

Technical reports

The Moving Average Convergence Divergence (MACD) indicator remains positive with the faster above the signal line. Both lines remain at the negative region.

The daily Relative Strength Index closed at the neutral.

The daily Commodity Channel Index ended in neutral territory.

bernard@tactician.com.my.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.