KLCI futures set to drift, awaiting catalyst

THE Kuala Lumpur Composite Index (KLCI) futures spot month contract on Bursa Malaysia Derivatives closed higher at 875.00 with open interest of 18,713 contracts last week.

The shorter trading week and low volume minimised market volatility as the January contract inched slowly to its expiry. The momentum remains southbound as the market is still regressing after its failure to stay above the 900 support line.

As February becomes the spot contract, rollover activities are evident, with its value trailing the underlying KL Composite Index closely.

The technical signals are still resting in neutral territory with both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) at odds as to the future direction of the market. With less commitment from the bulls to push back, trading is likely to stay southbound bias in tandem with the recent negative crossover on the Moving Average Convergence Divergence (MACD) indicator.

A tighter trading range is forecast this week given the shorter candlestick patterns and the presence of the strong barricade at the 900 line. With support resting at the 860 level there is still ample trading range for those seeking to enter only at key levels. With this in mind, traders are likely to stay patient anticipating better vantage points.

The weekly chart remains southbound as the momentum erosion has yet to end. There is still concern that the spot contract could retrace to the 850 support line should it fail to break above the current level.

Tactically the newly installed spot contract may continue to drift, taking the cue from its predecessor. With momentum remaining largely uninspiring, the February contract is expected to continue moving within the 860-900 band as it waits for a market catalyst.

Technical reports

The MACD indicator turned negative with the faster below the signal line. Both lines remain at the negative region.

The daily RSI closed in neutral territory.

The daily CCI finished at the neutral.

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.