KLCI futures set to take cue from cash index

THE Kuala Lumpur Composite Index futures March contract, which is now the spot month contract, on Bursa Malaysia Derivatives closed at 888 with an open interest of 17,405 contracts last week.

What a dull market it was. The February contract was trapped within a tight 870- 890 until its expiration last Friday. It was death by trading asphyxiation with painfully low volume and benign open interest. The wild gyration was evidently missing as a lack of catalysts and the refusal of traders to commit themselves led to a tight trading band.

From the daily chart perspective, the futures market's momentum remains in the neutral domain as indecisiveness sets in. At a high around the 900 line, the futures market was touching the overbought line. At the current pace, the market seems to have ebbed into a lethargic mode, tracking the cash index closely. As March 10, the day the second stimulus economic stimulus package or mini-budget will be announced, draws closer, there are expectations that the bulls in the market may start to come alive again. This may keep some sellers away as a stronger-than-expected catalyst may propel the futures higher.

The weekly chart is reflective of this possibility as it continues to display signs of a possible breakout. The upper and the lower lines of the Bollinger band have already narrowed and are prominently displaying this possibility as prices shrink further. It may be a catalyst-driven event where index futures may eventually break away from the tight trading band.

Tactically, momentum may continue to ease this week as index futures await signals from the cash index. The support at 880 will continue to hold as the March contract may continue with the trading direction its predecessor left behind. Immediate support remains at 880 and resistance at 900. Upper resistance can be found at 920.

Technical reports

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

The daily Relative Strength Index (RSI) closed at the neutral.

The daily Commodity Channel Index (CCI) finished at the neutral zone.

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.